When I first came up with the idea of starting my own business, I never thought about any of the things that I am thinking about now. I was excited about all the fun stuff. I didn’t think about any of the important stuff until I read something online saying something about homemade products doesn’t have a long shelf life. So, I did more research to find out how to extend the shelf life and that’s when my research began with everything else. I went from the shelf life to FDA regulations to legalities of starting a business.
There are four different legal structures that businesses typically choose from to run their business by. Sole proprietorship is one of the easiest to run and the least expensive. This is the type of structure that I chose to run my business by. The simplest way to explain this type of legal structure is that one person owns and operates the business and is responsible for seeking and obtaining financing. The sole proprietor has control over everything and they receive all the profits of the business, which is taxed as personal income. I chose this structure because it’s the only structure that fits with the way that I am going to run my skin care product line. The disadvantage of a sole proprietorship is being responsible for everything as well. if the business is sued for whatever reason, then the owner is responsible to pay any judgements against the company and potential dissolution of the business if the owner had died.
The disadvantages that occur within sole proprietorship is the reason why business will sometimes expand and change legal structure as they grow in business. A partnership is another type of legal structure that is easy and inexpensive to start off with because of the additional financial resources. I would say a good advantage of this type of structure is that a partnership allows each agent involved to combine their unique assets and talents, to create a whole greater than the sum of its parts. Of course, one of the disadvantages would be when partners don’t see eye to eye. Another legal structure is Limited Liability Company (LLC). This is a preferred choice for new operations and joint ventures because have this structure have the advantage of being treated similar to a partnership. The last structure is a corporation. This is a legal entity that acts separately from its owner.
Once my business starts to grow and I want to expand, I think I want to switch to an LLC because it offers more flexibility and It has some advantages and I do eventually want to protect my personal assets from liability. With sole proprietorship, if something was to go wrong, then you as the owner is responsible for everything.