One of the most important, but often misunderstood legal concepts is that of structure. Understanding what it means and how it affects a business can be the difference between success and failure.
What Is Structure?
Structure can refer to the hierarchy of a business organization or the types of legal protection a business has in place. It is the way companies form themselves in order to provide a legal basis for their activities. Examples of business structures include corporations, limited liability companies (LLCs), partnerships, and sole proprietorships.
Why Structure Matters
What makes structure so important for businesses is that it offers legal protection that allows them to reduce their risk exposure. When businesses are structured properly, it limits the amount of personal and/or corporate liability a person or business entity can be held liable for. This helps provide protection in case of a lawsuit. For instance, LLCs offer protection from their owner’s personal assets and separate their business and personal liability, reducing the risk of legal action.
Diving Into Flexibility
One of the great advantages of understanding business structure is that it can be customized for the needs of the business. It allows businesses to create their own rules based on their goals, preferences, and plans for growth. For instance, if a company wants to act as an umbrella for multiple subsidiaries, it can structure itself as a parent company with multiple LLCs beneath it. This offers flexibility and allows businesses to adapt and grow to meet changing business needs.
Structure Is Key
When it comes to business, understanding structure is an essential part of success. It is important for businesses to engage with a knowledgeable attorney in order to craft a structure that meets their specific needs and maximizes the amount of legal protection available. Structure is not a one-size-fits-all concept, and businesses need to take the time to make sure their structures are as optimized and tailored to their needs as possible.