Choosing a legal form for the new business

  1. Selection of the legal form is one of the key decisions to be made by a new entrepreneur before starting up the firm. What is the significance of this decision? What criteria should we apply? This section will discuss these issues in detail.
  2. There are two main trends when it comes to choosing the legal form in business. One of them involves focusing on formal issues related with registration. To put it shortly: what formalities need to be dealt with and in which offices? The second approach refers to Anglo-Saxon traditions, where the legal form is a derivative of the business concept as a whole.
  3. Although the formal and legal aspects are not to be ignored, the latter Anglo-Saxon approach seems much more justified. In economic reality, the legal form can be treated as a vehicle for the idea, used on the journey to a successful business. Obviously, parameters of this vehicle must be adjusted to the environment, characteristics of conducted activity as well as the intended speed of travel.
  4. In the suggested method of choosing the optimum legal and organizational form, the starting point is to have a relatively precise concept of starting-up and running a business. It is necessary to have at least a clear view of issues such as:
    • the subject of the business activity;
    • who will be a partner;
    • what will the scale of the activity be — at the beginning and within several years;
    • what will be the required level of investment exposure;
    • what will be the name of the firm.
  5. For many debuting entrepreneurs, legal issues are perceived as very complicated and difficult to cope with. Meanwhile, the basic problems in this field are well-known in practice. At the same time, in more complex cases, the assistance of experienced lawyers is available. However, the key to effective cooperation with lawyers is having a clear vision of the business. The entrepreneur must know what he or she wants; otherwise, there is no chance of presenting envisaged business concept and as a result, obtaining specific, professional assistance.