A Guide to Choosing the Right Business Structure

Business structure is often treated as an administrative formality. In practice it shapes ownership, liability, how you can raise capital, how you hire and how straightforward it is to expand or exit later.

Four factors worth weighing

• Ownership: how many shareholders, and how flexible must the cap table be?
• Liability and risk: how exposed is the activity you are undertaking?
• Operations: premises, staff, licensing and where you can contract
• Growth: additional branches, entities, investors or a future sale

Write the plan before choosing the vehicle

A one-page description of the business - customers, revenue model, headcount plan and geography - makes the structural choice far more objective. Without it, structures tend to be chosen on price alone.

Revisit the decision as you grow

Structures are not permanent. Restructuring, adding entities or changing shareholding is possible, but it is a project in itself. Reviewing your structure periodically, rather than only when a problem arises, keeps the cost of change low.