The first question to decide is whether the business activity is to be carried out by a private individual, or through any of the corporate forms provided for by the legislation of the country in which the company is to be incorporated.
This first choice has an unquestionable financial significance:
- The self-employed businessperson, at least formally, does not need to have an amount of own resources to contribute as capital, which is the case of a company.
- However, it is clear that, in order to start a business, the individual businessperson needs to have funds to be able to undertake the investments and set-up expenses required for the development of their activity. In case of not having own funds initially, at least it will be necessary for the resources secured on credit to have a long repayment term.
- The corporate formulas allow the capital contribution effort to be distributed among a more or less large number of partners, although there is also the possibility of companies with a single partner (sole proprietorship).
- In case of future financial needs, the individual businessperson will depend, in general, on their own availability of funds or on the banking funding channel; companies can resort to their partners (capital increases, contributions and loans), attract new partners or also resort to bank financing.
