management consulting

Types of Business Formation

By Barbara Thomas 18 July, 2023 4 mins read

The United Kingdom's company formation process involves creating and incorporating a company. This process is also known to be called company registration. In Ireland, company formation is also possible. There are three types of business formation: corporations, partnerships and sole proprietorships. You need to decide which one best suits your industry.

Corporations

A corporation is an entity that allows its owners to own stock in the business. These shares can be sold or transferred between owners. While shareholders are not personally liable for the company's assets and liabilities, they do have a duty of care. They may be held responsible if they fail in this duty. Corporations can be beneficial to companies that want to raise capital or hire staff. They can be a great choice for medium and high risk enterprises.

Corporations are legal entities that can enter into contracts, sue another party, own assets and remit federal, state, and local taxes. They can also borrow money from financial institution. To create a corporation, you will need to file paperwork with each state where you intend to do business. Additional paperwork may be necessary if you want to expand your operations.

Partnerships

A partnership is a type of business shared by two or more individuals. Although partnerships aren't legal business entities, many are registered with state and offer limited liability protection. In addition to this, there are also a number of licensing requirements. Partnerships must apply for an IRS employee ID number. You may also need it to get a building permit or zoning permit. In addition, a partnership may have to pay additional taxes, such as self-employment tax or employer withholdings.

It is easier to form partnerships than any other type of business structure. Because they are not subject to the same rules and regulations as corporations, they are often more tax-friendly. However, they may not be the best choice for all types of businesses. Partnerships are most commonly used for professional groups. These include lawyers, architects, physicians, and consultants.

LLCs

A company can form an LLC in several ways. First, complete the Articles of Organization. This designates the county where the company is registered. New York County generally refers to New York City's boroughs. However, some cities have both a county and a borough, so it's important to choose the correct county for your business. Next, you will need to name a Secretary-of-State as your agent for service of process. This will mean that the Secretary of state will receive any papers that acquire jurisdiction over the LLC.

A state certificate certifying that the LLC was registered in the state is a must during the business formation process. This certificate is required to get your company's tax ID number and set up a bank card for it. You should also prepare an operating agreement, which contains the legal and financial details of your business. The agreement may include information such as who is allowed to leave the company and who contributes capital. All information should be included, including the names and contact details of all members.

Sole proprietorships

Solo proprietorships are a popular choice for small-time business owners. This type business structure gives the owner complete control over their company. Additionally, it is inexpensive, and the owner isn't subject to the meetings and formalities of a corporation or limited liability company.

It is easy to start a sole proprietorship and to dismantle it. Many small businesses start off as sole proprietorships. Then, later on, they become limited liability corporations or LLCs. A sole proprietorship has the downside that it does not provide protection from the government and the owner is responsible for all the obligations and liabilities. Because they are relatively inexpensive and easy to set up, sole proprietorships are popular with people with smaller budgets.

Limited partnerships

Limited partnerships can be a good option when you are starting a new business. They can provide protection for general partners, so they won't be personally liable if the business defaults. Limited partners can also contribute to startup capital, but the general partners bear the greater risk of the company's failure. A limited partnership requires two or three partners. Partnerships must also be registered with Secretary of State. To form a limited partnership, the partners must submit a formal document called "certificates of limited partnerships". This document contains the business name, business agent name, and general partner name. The next step is to write an internal partnership arrangement that defines the roles of each partner, as well the limited partnership’s profits and losses.

A limited partnership can also be tax efficient. Limited partners don't have to pay self employment taxes, but general partners must. This tax savings can be extremely valuable because limited partners aren’t involved with the daily management of the company.

FAQ

How do I choose a good consultant?

Three main factors should be considered:

Experience - How experienced is the consultant? Are you a beginner or an expert? Is her resume a proof of her skills and knowledge?
Education - What did this person learn during school? Did he/she go on to further education after graduation? Is there evidence that he/she learned from the writing style?
Personality – Do we like this person/person? Would you want this person to work for you?
These questions are used to determine if the candidate is right for us. If the answers are not clear, it may be worthwhile to interview the candidate in person to get more information about them.

How do I become a successful consultant?

It is important to identify an area of passion. You must then build relationships. You need to know what clients want and how they operate. Finally, you must deliver results.

While you don’t have to be the greatest at everything, you have to be better than everyone else. You need passion for what your do. It doesn't suffice just to say "I'm going be a Consultant." You have to believe in yourself, and in what you are doing.

What does it cost to hire an expert?

There are many factors that go into the cost of hiring a consultant. These are:

Project size
Time frame
Scope of work
Fees
Deliverables
Other factors such as location and experience are also important.

What is the difference between a consultant and an advisor?

An advisor is someone who provides information about a subject. A consultant can offer solutions.

A consultant works directly alongside clients to help them realize their goals. The advisor provides indirect advice through books, magazines lectures, seminars, and the like.

Statistics

Over 62% of consultants were dissatisfied with their former jobs before starting their consulting business. (consultingsuccess.com)
"From there, I told them my rates were going up 25%, this is the new hourly rate, and every single one of them said 'done, fine.' (nerdwallet.com)
So, if you help your clients increase their sales by 33%, then use a word like “revolution” instead of “increase.” (consultingsuccess.com)
WHY choose me: Why your ideal client should choose you (ex: 10 years of experience and 6-week program has helped over 20 clients boost their sales by an average of 33% in 6 months). (consultingsuccess.com)
According to statistics from the ONS, the UK has around 300,000 consultants, of which around 63,000 professionals work as management consultants. (consultancy.uk)