Choosing a company structure

Most people choose a company structure by asking which one is cheapest to set up. That is the wrong first question, because the setup cost is trivial compared with the cost of changing structure later once other people hold shares or have relied on it.

The better first question is what the business looks like in eighteen months. A single founder consulting under their own name has genuinely different needs from three founders who expect to raise money and hire a team. Answer that, and most of the structural decisions follow.

Second, be honest about administrative capacity. Some structures carry meaningfully more reporting than others. If nobody in the business will own that work, the structure that looks efficient on a comparison table becomes a liability within a year.

Third, think about who else will be involved. Adding a shareholder to a company that left headroom is straightforward. Adding one where every share was issued at formation means a transfer between existing holders, which is more complex and has different tax consequences for the person giving them up.

Finally, write down why you chose what you chose. In two years, when circumstances have changed and you are reconsidering, the most useful document in the file will be the one explaining the original reasoning. Almost nobody does this, and almost everybody wishes they had.