3.1: How a Selected Business Sector is Regulated
Handling Legal matters
In starting a small business, one of the first questions you should ask is what form of legal entity you should use or “How should I organize my business?” Also, as your business grows and changes, you should from time to time ask yourself whether the entity you have chosen remains the best form of organisation for your business. The entities most commonly used by small businesses are:
(1) The sole proprietorship,
(2) Partnerships and
(3) Stock corporations.
In discussing these entities, this answers the following questions:
- Getting started
- How is each type of legal organisation set up?
- Who owns and who controls the business?
- Who is responsible if the business fails or has losses?
- Continuity and transferability
- How long does each type of Organisation last, and how does the owner sell the business?
- How are the profits and losses of the business taxed? Also included is a summary of the pros and cons of the different legal entities and a table (Table 1) comparing a number of factors to consider when you select one of them for your business?