Definition of Business Legal Entity or Business Legal Structure

Business Legal entity or Business Legal structure is a legal definition or legal position of your company that will help you determine your legal position and your establishment in the court of law.

According to Wikipedia about Business Legal Structure or Business Legal Entity; “A business entity is an entity that is formed and administered as per commercial law in order to engage in business activities, charitable work, or other activities allowable. Most often, business entities are formed to sell a product or a service. There are many types of business entities defined in the legal systems of various countries.

These include Corporations, Cooperatives, Partnerships, Sole Traders, Limited Liability Company and other specifically permitted and labeled types of entities”. Rules may vary country to country; to determine business legal entity or Legal Structure for your business, please consult tax attorney or tax expert on business liability and business taxes.

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Types of Business Legal Entity for your Business Legal Structure

As mentioned above while choosing your business legal structure it is mandatory to have a thorough research on Business legal entities types suitable for your company. Legal entities can be of many types for taxation, record keeping, liabilities & company sizing. These types will help you understand your strength and compatibility in the market. Following are the types of business legal entity you should consider before starting a business;

SOLE TRADER

Sole Trader is a very easy to form type of Business Legal structure & most common business legal entity among the small businesses. It is a one man show, a complete managerial control over all the departments and business existence. It can easily be formed and grow within the documented limitations. On the other hand, in sole trading, the owner is also completely responsible or liable for all the liabilities or taxes.

PARTNERSHIP

Business legal entity of Partnership involves two or three equally responsible partners in an organization of business legal structure & with mutual understanding agrees on sharing profit and loss of a company. The primary advantage of this type that the partner doesn’t have to bear the taxes over profit and loss, the taxation passed-through the partner to report the individual income taxes on them. General partnership can be formed with little formalities but in the case of two or more partner there should be written documents about profit sharing and loses and taxation over total income. And the primary disadvantage is the liability- that each partner is liable personally for the financial obligations of the company.

CORPORATION

A corporation is a commonly used type of Business Legal structure or business legal entity among the large organizations. It is different from the sole trading or partnership as the owner is a separate existence then the corporation in other sense the owner is not liable personally for the liabilities. Corporation can make profit and the advantage is no one liable personally unlike sole trading, in corporation the CORPORATION is liable to taxation and liabilities. While the disadvantage is to add a cost personally or recording a large pieces of documents. Incorporation sometimes shows a drawback in form of double taxation, S Corporation (Subchapter of corporation – POPULATION OF C Corporation) has the fact to avoid this situation by facilitating the individuals by passing through the income or losses on individuals.  

S CORPORATION

Business Legal Structure can be more brief with these subheadings here; S Corporation (sometimes called as S corp) that avoids double taxation first to the corporation and then again to the shareholders. S Corporation is a Subchapter you have to have Corporation first or legally registered as a Corporation to have Subchapter. Your Business Legal Entity can have many options looking into the above specified types.

CORPORATIVE

Corporative is a types of Business Legal Structure that has been created, owned and benefited for the people eligible to avail the services of the company (users). Benefits are distributed amongst the corporative members commonly known as User-Owner. I simple words you can say that elected board of directors run the corporative and by the voting of members direction of the company gets set. Purchasing the corporative share allows them to become a member of the corporative and become a part of Business Legal entity.

Limited liability Company (LLC)

Limited Liability Company has an existence as an offspring of the corporation that allows limited liability features of the corporation, taxation and partner flexibility to the member owner of the LLC. LLC can be referred as “a member owner” the owner of the LLC must be a member of corporation that share above features of the corporation. Members can be single, two or more partners of the corporation, depend upon the business legal structure, Business legal entity of your country. LLC are not taxed unlike the shareholders of the company as a separate legal entity. Profit and losses get “passed though” each member of the LLC and each member has to report personally and separately for the taxation.

Video Guide for Choosing a best Business Legal Structure and Business Legal Structure 

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Factors you must consider before setting up your Business legal structure or Business legal entity

There are some of the factors you must consider before opting for any of the above business legal structure as a business legal entity for your company. Startup risk and liabilities must be considered as they can affect your business legal structure even in growing within the Market. If you want over all control and you’re not afraid of risk you must go for the Sole Proprietorship. However, if you do not want to be bound with liabilities and taxation solely you must go for the partnership or LLC which is in fact a great idea for the entrepreneurs, starting a business and looking for the best fit to choose their business legal structure or business legal entity. Consider the below factors;

Complex Factor, 

Owner Liability

Risk Management

Managerial Control

Taxation

Regulations, License, Permits

Capital Investment

Records Keeping

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