Common Legal Structures

Different countries have several different types of legal structures for new businesses and it is the responsibility of the entrepreneur to choose the structure that is most suitable for the relevant organisation.

Natural person

Asset ownership, in this case, is not shared, and therefore, personal property is not protected. The natural person is responsible for all risks relating any commitments made. Therefore if, for example, a client goes bankrupt, the sole trader will suffer as a result. In most countries, a simple registration to the adequate authorities is sufficient to create this structure.

Sole proprietorship

By creating a sole proprietorship or opting for a general corporation,the founder will have control. There are many advantages to sole proprietorship: it is flexible, reactive and it satisfies the customer’s needs and requests; it will emphasize the quality of service. It should be noted that companies can benefit from government assistance, in the form of loan guarantees, tax exemption or reduction of certain fees or taxes.

Association

A non-profit association differs from a for-profit association partly because its earnings and profits are indivisible and belong to all its members.Associations may also receive grants. In an association, the board of directors is responsible for the structure and major decisions are often made collectively.

Cooperative

A cooperative is a collective enterprise in which each member is both an employer and an employee. This presupposes that the members are willing to undertake activities in groups and to accept the collective distribution of profits. The main aim is to develop the company’s own procedure rather than to make personal profits. This does not, however, prevent the company from ensuring its viability, and from ensuring its viability by way of expanding and generating profits as any other company.

Partnerships

This type of company can be seen as a legal entity having one or more partners. This structure is recommended if two or more cofounders bring contributions, either in cash or in industries (for example a business or a vehicle). This type of structure can boost banking relationships, as well as access to certain markets. However, there are several disadvantages to this kind of legal structure. First, the general partner has huge responsibilities. Second, the enterprise can be difficult to manage, because all decisions must be made in meetings. Lastly, partnerships often have to resort to consultants on accounting and administrative issues.