Different ways of doing business

Once you’ve decided to form a company, you have to figure out what type of company you want. It could be:

In some cases, the agency structure can be ideal. It can effectively isolate the creative members of the agency from each other, allowing them their individual freelance trading status while providing group marketing and production/support services. But an agency is still a business and someone has to own it and run it. An agency will usually either be a partnership or a corporation.

A partnership is simply a group of two or more individuals who decide to operate together, with each responsible to the other. The legal concept of ‘joint and separate liability’ is pretty standard in this case. In simple terms it means that if your business partner runs up huge debts or liabilities, you may be asked to pay for them. In creative businesses, this is rarely the best structure to ensure unfettered personal exploration of ideas. No-one needs to have their friends breathing down their necks.

A trading corporation may sound like a lot of effort to set up – they’re called different things in different countries (limited or incorporated company, LLC, PLC etc.) but the concept is fairly standard. A corporation is a trading entity owned by shareholders (or just one shareholder) who appoint a director or board to run the company as the owners require. There are specific legal and accounting obligations to protect the shareholders and other companies that trade with it. Usually, the directors and shareholders are protected from certain trading debts in the event that the company fails. This is the concept of ‘limited liability’. It may sound complicated, but it’s not rocket science. There are people who can make the process of setting up a company in this way very quick and painless. Who owns the creative company, who runs it and how profit and decision-making is distributed will be the subjects of other articles.

The not-for-profit foundation or the similar, but not identical, NPO (non profit organisation), is a complicated entity governed by myriad rules and regulations which differ according to the country you establish yourself in. Usually, there will be a board of people responsible for steering the company without being too closely involved in the day-to-day details. There are few advantages for a small creative company which simply wants to make work and get paid for it. However, if you are thinking of creating an artistic ‘movement’ or an over-arching concept of significant humanitarian benefit, the NPO may be best.

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