Choosing a structure: private limited, partnership or proprietorship

Start from what you are actually doing

Most founders pick a structure because someone told them to. That is backwards. The structure should follow three things: how many people own the business, whether you need limited liability, and whether anyone will ever invest.

Private limited company

The default for a business with two or more owners. Liability is limited to what you put in, shares can be transferred, and investors understand it. In exchange you accept annual filings, a statutory audit and a registered office.

Partnership

Simpler to set up and cheaper to run, but partners are personally liable. Reasonable for a professional practice between people who trust each other completely. Rarely the right answer if you plan to raise money.

Sole proprietorship

There is no separate legal person: the business is you. That means the fastest start and the least paperwork, and also that a business debt is your debt. Fine for a small trading or service operation you run yourself.

What actually changes your mind

• Foreign ownership. A proprietorship is not the route. If a non-resident will own part of the business, you are almost certainly looking at a company.
• A corporate shareholder. Only a company can hold shares in a company.
• Bank and buyer expectations. Larger buyers and most banks are more comfortable with an incorporated entity.

If you are unsure, answer the questionnaire and say so — "I'm not sure" is a valid answer and we will come back with a recommendation rather than a guess.