No two start-ups are the same. Having the right business structure for your specific start-up is crucial if you want to maximise profits and minimise liability.
Four key points to consider when choosing the right business structure are:
1. Where you want liability to fall if something goes wrong
2. Whether you have (or plan to have) partners/co-founders or investors
3. The cost of setting up and maintaining your business structure
4. Tax implications
A structure popular with start-ups is a proprietary limited company (Pty Ltd), as it has strong liability protections, tax benefits and allows you to allocate shares. However there are high set-up fees and ongoing costs.
There’s also the option of partnerships if you have multiple founders and want to pool income, expertise and resources. On the other hand, if you’re looking for the lowest-cost option and you are on your own, becoming a sole trader might be the option for you. However these structures don’t offer as many tax benefits and less protection from liability.
It’s also important to put any agreements you make with your co-founders in writing, (i.e. Shareholder’s Agreement or Partnership Agreement). This makes sure everyone is clear on how the start-up will be run, who owns what, and will minimise misunderstandings.
IP is an important part of what distinguishes your products or services in the marketplace and the branding you portray to your customers. Having sufficient IP protections in place prevents people from copying your branding, website content or original product and from essentially piggy-backing off your reputation and goodwill.
A couple of things to look out for when it comes to IP: