Overview of company structures

Considerations for deciding your business structure

To ease comparison and weighing of the pros and cons of each of the above business structures, business entrepreneurs shall consider on the following factors:

  • The nature and purpose of the business
  • Size and scope of the business
  • Extent of personal liability
  • Capital required for startup.
  • Can the business attract investors?
  • Startup procedures, costs, timeline, etc.
  • Tax implication for the chosen business structure
  • Current and future business needs
  • Extent of control desired over the business
  • Extent of business risks

For one to establish a low-risk small scale business where he/ she is the sole owner with sufficient financial resources at hand, it will be simpler and easier to register a Sole Proprietorship business. However, there is no distinction between the sole owner and the business entity and therefore the sole owner’s liability is unlimited and there’s no protection of personal assets.

If one wishes to share responsibilities of running a business or has insufficient financial resources, then Partnership could be the answer. However, under General Partnership, every partner is personally liable for the debts/ liabilities of the business and is liable for each other’s actions. On the other hand, with Limited Partnership (where at least one partner is a general partner), the limited partners are not personally liable for the business liabilities or wrongful acts of the other partners but will have no say in day-to-day operations and shall remain a passive investor. Partnership can be difficult to maintain due to suitability and potential conflict.

Companies can also be limited liability or unlimited. Due to its risks towards personal liabilities, rarely does an investor opt for an unlimited structure.

Incorporating a private limited company is usually the best choice despite a more complex setup and ongoing compliance. The benefits are many to say the least and are considered by most to override the downside of ongoing compliance requirements.