Startups can be started using any business structure, whether it be a Sole Proprietorship, Partnership Firm, LLP, or Company, it all depends on nature of business being proposed, nature of ownership and scale of operation of business.
However, while choosing the format of business, an entrepreneur should consider the following:
1. Legal requirement – Loans, clearances, legal compliances may be required by businesses to start and run businesses, no need to partake full personal responsibility of all such requirements, corporate structure provides a level of security to business owners who want to deploy others to take a share of compliance requirements.
2. Investment Requirements – Benefits of Company as a business structure should be carefully weighed, particularly in certain types of business where future partners may be required for induction, while maintaining operational autonomy. more so if a business wants funds from public there is no other option that Public listed Company.
3. Branding and Future Scaling needs of Business – Consider Intangibles like Domain Names, Company Names, IPR Brand Names etc. may not be available in future, it’s better that the same be secured at the time of starting of business itself.
However as like every other thing, there is a cost of operating a Corporate Entity, things need be done in a standard manner, compliances are supposed to be ensured, however in my personal view this gives greater transparency to operations and provides greater opportunity to attract high value resources, like qualified/experienced employees and Mentors, funds from VC, PE and other funds, while creating a virtually immortal business.
Article written by
Mr. Rishi Raj Tandon
Founder Saptrishi Infosystems
