When starting a business, the choice of legal structure is one of the most difficult issues. Only regulated activities avoid this question, as the legal status is imposed by law. However, by studying each essential element of your future business, you should easily find the most appropriate legal status.
Most entrepreneurs who decide to set up a business need to consider a number of key issues:
- The number of partners
- The protection of assets
- The addition of legal clauses (approval clause, exclusion clause, inalienability clause, etc.)
- The social regime of the manager
- The company’s tax regime (income tax or corporation tax)
The first question to ask is therefore that of the association. Indeed, the legal structure depends above all on the number of individuals who wish to join together and participate in the project.
Thus, a person setting up a business alone can choose one of these structures:
- Sole proprietorship
- Sole proprietorship with limited liability
- One-man business with limited liability
- Single-member simplified joint stock company
However, in the context of a startup, several individuals usually choose to join forces. The most suitable structure is therefore a multi-person company. It is then necessary to choose between:
- The limited liability company (LTD)
- The simplified joint stock company
- Or the public limited company (PLC)
Of these three possibilities, most startups opt for the simplified joint stock company. This is because it operates via shares and offers flexibility in drafting the articles of association. This is important in order to maintain a high degree of agility. Furthermore, this flexibility extends to share classes or shareholder voting rights. All these elements are very relevant for a fluid project like a startup.