If you start a new business you have to choose the best legal form for it. You have to consider: ● The costs of getting started ● The level of control you want to have: would it be ok to have some partners? ● How do you want to finance your business? ● How much personal exposure to liability are you willing to accept? What is a legal entity? A legal entity is a company or organization that has legal rights and responsibilities, for example the right to make contracts and the responsibility to pay debts. Definition of sole proprietorship
J.L. Hanson: “A type of business unit where one
person is solely responsible for providing the capital and bearing the risk of the enterprise, and for the management of the business.”
The business is not a distinct legal entity,
separated from the owner. Examples: ● Bakery ● Restaurant ● Bed and breakfast ● Artist ● Wedding planner ● Consultant ● Designer (working alone) Sole proprietorship: negative aspects ● owners manages all the aspects of the business ● owners finance the business using their own resources ● owners bear unlimited personal liability with all their personal assets: personal properties of the owner can be used to meet the business obligations and debts ● while the assets can be sold (including the name) you can't sell the sole proprietorship to someone else Freelance Many sole proprietorships perform freelance work, and many freelance workers are sole proprietors, but these terms are not synonymous. In fact, they refer to entirely different aspects of business. One refers to the legal status and structure of a business; the other refers to the business relationship between a self-employed worker and a client. A sole proprietorship is an unincorporated business owned by a single individual. Freelance workers are individuals who sell their services to clients but don't have an employer-employee relationship with any of those clients. Working just as a freelancer involves less paper work than being a Sole Proprietor. Freelance and sole proprietorship The differences from a fiscal and a social security point of view can be big and it is therefore essential to pay close attention to this choice when deciding to open the VAT number. One important difference is that a Sole Proprietor has the legal ability to hire employees, while a Freelancer doesn't. A Freelancer can work freely from nearly any location while a Sole Proprietor must register the location of the business. Individual professional studio
Many studios are born with a single owner,
maybe a professional who has previously collaborated with another studio and then has decided to start a new business. The motivation could be the need of autonomy. Individual professional studio
A single holder bears responsibility for the
performance of the entire professional studio: the necessity to generate profits; the definition and maintenance of work methods and appropriate professional principles; marketing, promotion and sale of services offered by the firm to current and future customers; finding the necessary funds for its operation. Individual professional studio
It is up to you to you decide how to involve
other people in the activities of the studio. In case you don't have all the skills or experience necessary to manage all the aspects of a studio ( e.g. marketing, quality control) you could use external consultants, or appropriately selected coworkers. Individual professional studio You may have problems keeping yourself up to date with all the regulatory and accounting news. You will be constantly on call, even on holidays. You may not have sufficient assets to adequately finance the studio. An inadequate level of capitalization (e.g. an excessive level of debts) could cause liquidity problems or the inability to make the necessary investments ( e.g. in training or in technology). Definition of a partnership
A partnership is a form of business where two
or more people share ownership, as well as the responsibility for managing the company and the income or losses the business generates in accordance with terms of the partnership agreement General Partnership (GP - snc)
At least two persons are required to form a
partnership. There can be a maximum number of partners. Partnership is created by an agreement that specifies everyone’s rights and responsibilities: it could be written or oral but is not required. The business of which the persons have agreed to share the profit must be lawful. General Partnerships
Partners have unlimited liabilty: each partner is
personally liable not only for his or her own actions but also for the actions of all the partners. A partnership is not taxed as a separate entity: income, losses, credits, and certain deductions are passed along to the partners' tax situation. Negative aspects ● Changing partners, or the death of a partner, dissolves a general partnership, so general partnership interests are not readily transferrable ● The share of a partner cannot be transferred to others (partners or not) ● Sharing decisions is not always easy Limited Partnership (LP - sas)
The law permits business owners to form a
limited partnership which has two types of partners: one or more general partners who run the business and are responsible for its liabilities, and any number of limited partners who have limited involvement in the business and whose losses are limited to the amount of their investment. General and limited partners General partners have unlimited liability for the debts and liabilities of the partnership. Limited partners liabilty is limited to the extent of their capital contribution, so doesn't affect the partners personal assets. Partnership Your studio could be a partnership. If you decide to create a new partnership it is essential to write down the guidelines you define. Everyone working in the studio must be aware of the working methods. If you decide to become part of an existing associated studio, you will have to accept its systems, processes, directives and philosophy. It is a quicker and easier solution but it also means it could be very difficult to change the mentality of the other partners. Partneship In small partneships, all members equally contribute to the funding, participate in the same measure to the distribution of profits and all are involved in the process decision. This formula is often used in the first phase of the life of an associated studio. Partneship In small partneships, all members equally contribute to the funding, participate in the same measure to the distribution of profits and all are involved in the process decision. This formula is often used in the first phase of the life of an associated studio. Partnership An associated study can be constituted with a private contract (signed in fornt of a notary) or a public deed. The document must include the name, surname and professional titles of the members and must be transmitted to all the competent professional associations. The studio must get a VAT number from the Revenue Agency. Partnership The fees are received by the association and the profit partecipation rate for the partners vary according to the amounts due. The studio is not subject to direct taxes: each member will be subject to income taxation, in proportion to the income produced within the association. Consolidation A group of small professional studios can join together to give life to a larger studio, in order to reduce costs and achieve greater operational efficiency. The best working technologies in the original studios are transferred to the structure, thus saving money on costs and / or increasing revenues. The model obviously assumes that the buying studio has the capacity to make decisions quickly and pragmatically and that the acquired studio is willing to accept its decisions. Consolidation
Listing your studio on the stock exchange is not
permitted in Italy. This form of studios doesn't represent a significant share of the market in the Countries where listing is possible. A Corporation A corporation it’s a legal entity and is entirely separate from the owners. Corporate property is legally separated from the property of shareholders. Corporations can enter into binding contracts, buy and sell property, sue and be sued, be held responsible for its actions, and be taxed. Once businesses reach any substantial size, it is advantageous to organize as a corporation so that its owners can limit their liability. Corporations, then, tend to be far larger, on average, than businesses using other forms of ownership. Cooperatives A Cooperative is a business owned and controlled by those who use its services. While the ultimate goal of both partnerships and corporations is to make money and share it, co- operatives have a different purpose, which consists - depending on the type of cooperative - in giving jobs, or consumer goods, or services to their owners, at better conditions than those they could get from the free market. Shareholders have limited liability and there are limitations in the distribution of profits. Cooperatives Each shareholder has the right to express one vote in the shareholders' meeting, regardless of the value of his / her share (remembert that in corporations the votes are attributed in proportion to the number of shares held by each shareholder). Members are taxed once on their income from the cooperative itself, and not separately on an individual and corporate level. For-profit cooperatives are generally taxed as normal companies but they can reduce tax exposure by issuing patronage dividends (refunds issued to people purchasing their goods or services).
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