It is hard to know what the future of your business will bring in the early planning stages. Even if you have experience in a specific industry or with running other businesses previously, what happens with a specific concept in a particular market can be hard to predict.
You have to make major decisions early on as an entrepreneur that will have an impact on everything from the kinds of financial support available to the organization to the tax liabilities of running the company.
Growth may force the re-evaluation of your model
The form you choose for your business in its earliest days can help protect you from liability and set you up for optimal financial support. Of course, what works best for you in the early days, when you work alone, may be quite different from what is best when you expand to have dozens of employees.
When your business gains traction and grows or when you need to change the focus of the company to bring it into the black, you may realize that your original business structure is no longer the best option. Thankfully, you can potentially update the structure of your business for your current needs.
With the right paperwork and plan, big changes are possible
A lot of entrepreneurs spend many hours considering the right form for their business. There are liability risks, tax considerations and operational advantages to different business forms depending on where an entrepreneur seeks funding and their business model.
Whether you want to upgrade a sole proprietorship to incorporate it or turn a partnership into an LLC that you own by yourself, you will likely need to file paperwork with the state. There may be implications for your future tax obligations and insurance requirements that you need to consider carefully. Thinking about what you hope to achieve with your company in the next five years can help you decide if changing your business structure is the right move.