How to choose the organizational form of business

The first question that needs to be addressed before embarking on your business project is the right organizational form for your business. The specialists of “LEXLAB” Law Firm have a wealth of practical experience and skills in applying corporate law. We offer you to understand more about choosing the organizational form of your business as the first step in creating a business entity.

The main purpose of doing business is to make a profit, and any activity for this purpose requires competent design. That is why in addition to the idea, plans, finances and partners, there is a need to consider all legal aspects, since entrepreneurial activity without official registration may eventually lead to liability.

To prevent this from happening and your own business to work within the law, our corporate law experts have prepared this article.

So, how to choose the legal form for your business, what they exist and how they differ? What is the procedure for state registration of business? What taxes and fees do I have to pay? Our lawyers will help you understand all these issues.

As our corporate law practice shows, there is no universal recipe for choosing a form of business. It all depends on many factors and circumstances, so each case requires an individual approach.

In order to choose the right organizational form for your business, you need to find out the following elements that your business will be given:


You need to have a clear understanding of the area in which your business is going. What kind of economic activity will be the main one? Please note that certain activities require appropriate permits or licenses, such as if you plan to open a healthcare facility and so on. There may also be some requirements for premises where your business will operate. For some activities, a special legal form is provided, for example, for banks and some financial institutions, the legal form of a public or private joint stock company is provided.

Depending on your core business, you will need to identify your target audience. Will it be individuals or legal entities that are predominantly targeted? Will your clients be interested in obtaining accounting and tax records, as this will influence which legal form you need to choose.


Also, do you need to decide if you plan to do business in person or have partners? How is it possible to arrange joint case management for several persons? How to sign a partnership agreement? What are the risks of partner relationships? Everything will depend on how many people are involved in running the business and what the role of each of them is.


The revenue that a business plans to receive from its activities is a projected indicator, and therefore may differ from the realities. However, starting a business is still related to certain targets, and therefore you need to count on your profitability and performance of your business. A properly calculated and designed business plan can help you avoid many risks. If you are planning to earn big profits, is it advisable, for example, to register with an entrepreneur on a simplified system? An entity's annual income is one of the main criteria for applying a simplified tax system in our country.

One of the important questions that comes up when preparing your business plan is how you plan to run the business - in person or through hiring. How many employees do you plan to hire, whether it will be full-time or part-time or possibly seasonal work? What will be your wages, as well as taxes and budget deductions? How do I optimize my payroll costs? Is it advisable to hire employees under a contract of employment or to cooperate with them under civil contracts? All this needs to be addressed at the stage of setting up a business in order not to make mistakes in the future.

The following is not an exhaustive list, but we hope that the path to choosing the best organizational form for your business will be easier. A good start to a business is half the success, so don't neglect the legal component. If you have any questions, please contact the attorneys at law of “LEXLAB” Law Firm, which provide services in the field of corporate law.