How to structure your business for success
June 27, 2019 - 6 minutes readBuilding a business is like playing a game of chess. The only way to win is to have a plan, think several moves ahead and anticipate what might come your way.
If you make a couple of wrong moves at the start, it’s tough to recover, and any obstacles you’ll face along the way will be doubly hard to overcome.
So rather than just winging it and hoping for the best, follow our five-step guide to structuring your business right from day one.
Choose a structure
There are three main types of business structures to choose from, which differ in terms of scalability, liability and potential for investors. You can also choose to switch to a different structure to take advantage of different benefits as you grow.
Sole Trader
The simplest and most popular business structure when you’re just starting out. You and your business are essentially seen as the same thing. It’s quick and easy to set up, you have ultimate control, and any profits made are all yours.
The biggest downside is that you’re solely responsible for any losses, and this could affect your personal assets.
Partnership
Similar to being a sole trader, but extended to include two or more partners that will share the responsibilities of the business.
Partnerships are also easy to set up, with business partners sharing decision making, as well as the profits, according to their share of the business as detailed in a partnership agreement. Also, any debts incurred by one partner are the responsibility of all partners, something which is called joint liability.
Limited Company
This is the standard set up for small and medium sized companies. It’s different to sole traders and partnerships as the company is completely separate from the owner. This means you won’t be personally responsible for losses or debts.
Instead, you become a director and shareholder. There’s more admin and paperwork involved than simpler structures, but it’s one of the most tax efficient ways of working. Plus you’ll find that some clients will only do business with limited companies.
Also, if you plan on selling the business after a few years, having a limited company gives you something more tangible than a sole trader business attached to your name alone.
For advice on what structure’s best for you, get in touch and we’ll explain in a bit more detail.
Do everything by the book
Before you go into business you need to know what the rules and regulations are around tax, insurance, employment law, data compliance and registering a company.
Regulations change from one industry to the next, so knowing your sector inside out is critical to make sure you don’t get caught out by your local tax authority.
That’s why research is so important, because the last thing you want is to create a thriving business which feels like it’s growing nicely, only for everything to be snatched away because you didn’t register the company in the correct way or provide the correct type of insurance to your employees.
Know your role
As the owner, your primary concerns are investment, profits, and the future of the business. But as manager, you need to keep the day-to-day operation running smoothly.
It’s fine to wear these two hats at the start, but as you grow, it makes sense to hire a business manager who’ll keep track of staff and their workload, allowing you to focus on business strategy.
The last thing you need is to feel overwhelmed, as the day-to-day hinders your ability to plan.
Create a profitable environment
The most successful businesses are the ones where every employee pulls in the same direction and enjoys the profits of success.
You can achieve this by offering share options for staff when they hit sales targets or stay with you for several years. It’s one of the most powerful tools you can use, transforming staff from those who just turn up and get paid, to ones who are hungry for the success of the business.
Trust the experts
Every business has its own hurdles to jump, and every sector has its own way of operating. But the one constant is that structuring a business correctly is the only way it can perform well long term.
So if you’re…
- An entrepreneur who wants to have the perfect structure in place before making a sale
- A founder interested in forming a company in Monaco (and the benefits it brings)
- A CEO who oversees multinational trade deals but needs help reducing the amount of tax paid
… our business specialists can help you with formation, structuring and admin of your company, especially in Monaco, where growth often happens faster.
Get in touch for more information
Email: richard.maclellan@ebc-trust.com
Tel: 00 377 92 16 59 99
