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Business Models

In: Business and Management

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Business Models When stating up a business, there are many different business models that can be chosen. Some of the most popular models are: Sole Proprietorship, Partnership, Limited Liability Partnership, Limited Liability Company, S Corporation, C Corporation and Franchise. When deciding which business model is most appropriate, there are two major elements to consider: taxation and liability. Each of the above business models has advantages and disadvantages in these two areas. This paper will discuss the pros and cons of each business model and provide a scenario that illustrates when a particular model would best be utilized.
Sole Proprietorship In simple terms, sole proprietorship refers to a business that is run by a single person. The sole proprietor enjoys all the profits as well as bears all the risks of the business (everymanbusiness, 2011).
Pros
Being one of the simplest of all business models, a sole proprietorship can be set up with very little effort. There is no special paperwork or extra fees involved in creating a sole proprietorship. In some states it is required to register the business, however, in other states it is not. The owner has the right to make all management decisions concerning the business, including hiring and firing employees (Cheesmen, 2011). Maintaining a sole proprietorship is much simpler than any other business model. Taxes are simplified with sole proprietorship as the business, and individual are considered as a single entity. The only tax that needs to be paid pay is the self-employment tax (everymanbusiness, 2011). Income tax details are reported on the owner’s regular personal income tax form. No additional or separate form is involved.
Cons
The major drawback to a sole proprietorship is that the owner is liable for all contracts and torts of the business. If a lawsuit is filed...

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