...Forms of Business Erin Epps Law/531 August 1, 2011 Christine Benway Forms of Business There are a number of different types of businesses: sole proprietorship, partnership, limited liability partnership, limited liability company, S corporation, franchise, and corporate firm. Each form of business has benefits which it can provide to its owners. As a person in business it is extremely important to determine which form of business best suits the intended goals and needs. According to the State of Iowa (n.d.),“a sole proprietorship is the oldest, most common, and simplest form of business organization” (Sole Proprietorship, para. 1). It is a business which is owned and managed by a single person. This form of business is best utilized by a single individual starting a small business. A good example would be a person starting up a café. All management decisions rest with the proprietor and the business is only taxed on the owner’s income. Since any and all liability will fall on the sole proprietor, it is pertinent that, whatever the business is, it has limited liability issues. The business must be small because as a business grows it becomes more beneficial to transform into a more complex business form. According to the State of Iowa (n.d.), “the limited liability partnership is essentially a form of general partnership…whereas the partners in a limited liability partnership are statutorily provided full-shield protection” (Limited Liability Partnership, para. 1)...
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...Business Organization Forms Alyssa Wiseman Western Governors University Overview The decision to change from one form of business organization to another can be quite a daunting task. With multiple factors to take into consideration, it should not be a decision that is taken lightly. I have been hired to facilitate this process by outlining six different forms of business organizations, the key characteristics that differentiate one form from another, such as liability, income taxes, control, continuity of the organization, profit, expansion, and compliance, and their advantages and disadvantages. Below you will find a detailed report on such findings, as well as a memorandum outlining my recommendations on changing business forms. Sole Proprietorship The majority of business forms in our country fall into this category. Sole proprietorships make up almost three quarters of all American businesses and most are one-person entities (Stevick, 2006). Since sole proprietorships are generally run by a single person, all of the business’s responsibilities, decisions, and capital fall back on the sole owner. While it is known that sole proprietorships are fairly small, the primary distinctive feature is the unlimited and unshared responsibility of the sole owner (Stevick, 2006). Liability. One drawback to sole proprietorship is that, along with sole responsibility and sole decision making, liability falls solely on the owner. “Financial liability is unlimited...
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...I. Sole Propietership A sole proprietorship is a type of business where there is no legal distinction between the business and its owner. It is the most popular form of business in the United states. Before you decide that this is the tyoe of businwaa you want to run, you should consider the following. • Ownership- In a sole proprietorship, there is only one owner. They are in control of all areas of the business and are legally responsible for the business’s finances. Those finances would include any debts, loans, and any losses that the business has accured. The owner also revieves all the profits, however they will be taxed a tax that specific to their type of business. However if the owner dies, the business dies with the owner. In order to keep the business going after the death of an owner, there must be a living will of will that thransefers the business to someone else. • Management- Since a sole proprietorship is a small business, the owner manages it by himself. They can hire employees to help out with the day-to-day dealings of the business, but ulitimate control is the owners. They have the final say. • Finance- The owner is responsible for getting all the money needed to run a sole proprietorship. They can go to others, like the bank, relatives, or friends, for the money. Tax planning for a sole proprietorships is extremely hard. The United States has several different tax rates depending on what income is being taxed. Ordinary...
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...Forms of Business Kimberly Smith FIN231_1 February 14, 2016 Instructor McAndrew Forms of Business There are at least five different forms of business. They are proprietorship, partnership, corporation, limited liability company, and cooperative. The three major forms of business are proprietorship, partnership, and corporation. With proprietorship (also known as sole proprietorship), the business is only owned by one person. This person assumes all of the responsibility for the business. They also receive all of the profit. According to Melicher, & Norton (2014), “Proprietorships are the most widely used form although they are generally the smallest organizations in terms of assets”. Almost three fourths of firms in the United States are sole proprietorships. Partnerships are the second largest form. With this form of business, two or more people own the business. The business is for profit. Many times people choose partnership because they need to pool finances, but it is also helpful to share knowledge, property, equipment, or business skills. One person may have the knowledge to run the business, but they need someone else with the finances. In some instances, they may start off as a sole proprietorship, but they change to a partnership in order to expand their company. “A corporation is a legal entity created under state law in the United States with an unending life and limited financial liability to its owners” (Melicher, & Norton, 2014)...
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...Forms of Business Lurene Flynn Law/531 October 24, 2011 Christine J. Benway, J.D. Instructor Forms of Business Determining the type of business to open is very important in order to know the business form that will be used. Knowing the business structure is important because it determines how the business income will be taxed. This paper will discuss the different forms of business, give examples of each form, and justify why the corresponding business form is preferred. Sole proprietorship according to Cheeseman (2010) is the form of business in which the owner is actually the business: the business is not a separate legal entity (Cheeseman, 2010, p. 530). “An individual starts the business in his or her own name and does not require any special legal organization beyond the normal requirements such as licenses or permits” (Georgia Trend, 2006/2007, p. 34). Beauticians are great examples of a sole proprietorship. Beauty shops are usually owned by one person, while having other people working in them.This type of business form is preferred by beauticians or a plumber because it is easy, no formalities, and most importantly no federal or state government approval is required. According to Cheeseman (2010) the owner has the right to make all management decisions concerning the business, including those involving hiring and firing employees (Cheeseman, 2010, p. 530). A sole proprietor owns all off the business therefore he or she receives...
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...Many people dream of starting their own business and being their own boss calling all the shots. Before starting a business, entrepreneurs must think about what kind of business they want to start and under what Forms. The different kind of forms to consider is sole proprietorship, partnership, corporation, and franchise. Each form is tailored to certain kind of business and knowing the details of each will enhance the business strategy. Sole proprietorship: This form of business structure is mostly used by someone who owns a business by themselves. An example of this type of business in someone starting a home based business such as direct sales. Selling merchandise out of a home office is ideal for new start-ups because the direct sales company usually has an easy to follow plan to where the business owner only has to implement that plan. The advantage to owning this type of business is the owner is in complete control and can work as much or as little as needed. Other advantage is the owner can keep control of inventory, does not have to worry about rental space cost and business owner is able to take advantage of the tax breaks for operating out of the house. The disadvantage is that the owner is in complete control and is responsible for marketing, budgeting and any labiality claim towards the business. Partnership A partnership business is similar to a sole proprietorship but instead of just one owner, there are usually two or more owners. For instance...
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...Legal Forms of Business There are many forms of businesses, from the small business to the corporate business that are found all over the world. Each has its own unique properties, as well as some areas that are similar to all. In this paper, I will give scenarios of the following legal forms of business: sole proprietorship, limited liability partnership, Limited Liability Company, S corporation, franchise and corporate form. This paper will also discuss the justification as to why this business form is preferred. Sole Proprietorship. Suzie owns a shop that does body wraps that helps individuals have slimmer waists and thighs. People are wrapped like mummies and the elastic wraps are saturated in a mineral solution to help assist in breaking down fat. She owns a small shop in a strip mall downtown. A Sole Proprietorship is a business that is owned by one person, and is commonly known as a small business. It is preferred by individuals who want to start their own business because they can make all the decisions regarding payroll, hiring and firing of employees ("Doing Business as a Sole Proprietor,") Business owners of this type file their own taxes. The owner can also sell the business without the approval from others, since they own the business outright. Personal liability is also a factor when opening a business as a sole proprietor. If for example, a customer gets burned by the wraps that are used and the customer sues Suzie, she will have to hire her own attorney...
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...Forms of Business Business Law/531 Forms of Business A sole proprietorship owner is liable for 100% of the business. This means that any debts of the business are also debts of the owner (Chesseman, 2010). This is a disadvantage for a sole propriety owner. Sole proprietor owner gets a tax break. The owner can file a single personal tax form. A sole proprietor is also subject to the least amount of government regulations of all business entities (Chesseman, 2010). When it comes to running this type of company, there are no legal formalities to forming or dissolving ones business. This is because there are no shareholders, investors or banks involved.When an owner of a sole proprietorship dies, the business dies with them ( Chesseman,2010). One can also convert one’s business into a partnership. In a partnership partners share profits and the losses together. Partners have shared responsibility with debts from business deals. Both partners are subject to financial liability if one partner is negligent.A partnership is exempt from double taxation. In a partnership owners can claim their portion of income generated through the business as personal income tax (Chesseman, 2010). When in a partnership, partners owe a contractual and fiduciary duty to one another (Chesseman, 2010). Partners have to trust one another because they have a fiduciary duty to each other. Partners should not borrow money, enter into secret contracts, or do anything illegal without other partners...
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...Forms of Business There are multiple business formation options available to those looking to start a business. The type of formation depends various factors “including the ease and cost of formation, the capital requirements of the business, the flexibility of management decisions, government restrictions, personal liability, and tax consideration” (Chessman, 201) to name a few. The major forms of business organizations are general partnership, limited partnership, sole proprietorship, limited liability partnerships, limited liability company, and corporation. Having an understanding of the type of business to form depends on what the goal of the company is. Sole Proprietorship A sole proprietorship is the simplest form of business organization. The owner of the business is the business and there is no separate legal entity. Management decisions concerning the business are made by the owner without having to consort with anyone else. All the profits from the business belong to the owner. One would set up a sole proprietorship if they running a small business, such as a restaurant named after themself. The business would belong to them and is identified by their name as is the form of business. The preference for this setup would be to have complete control of the menu, restaurant décor, staff, and operation of the establishment according to only the owner of the establishment. Partnership A partnership “is a voluntary association of two or more persons for carrying on...
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...Explain the forms of business. Which form of ownership would you prefer? There are 3 main forms of Business organizations a) Sole Proprietorship (b) Partnership (c) Corporation a) Sole Proprietorship In a Sole Proprietorship, there is no legal distinction between the Sole Proprietor's status as an individual from his or her status as a business owner. Although sole proprietorships are common in a variety of industries, they are concentrated primarily among small businesses such as repair shops, small retail stores and service providers such as plumbers, hairstylists and photographers. Advantages • Easiest to get started • Greatest Freedom of action • Maximum authority • Income tax advantage and Social Security advantage Disadvantages • Unlimited Liability • Death or illness endangers business • Growth limited to personal energies • Personal affairs easily mixed with business b) Partnership A partnership is an association of two or more persons who operate a business as co-owners by voluntary legal agreement. Many small businesses begin as partnerships between co-founders. Advantages • Two heads are better than one • Additional sources of venture capital • Better credit rating than corporation of Similar size Disadvantages • Death withdrawal, or bankruptcy of one partner affects business • Difficult to get rid of bad partner • Hazy lines of authority c) Corporation ...
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...PROPRIETOR An unincorporated business owned by one person is called a sole proprietor. Others may be hired to help but the sole proprietor runs the business directly. The destiny of the company is ultimately on the shoulders of the sole proprietor. Managing, sales and finance are all performed by the sole proprietor. There is no need for any formalities or agreements when the business is run by one person. The characteristics of a sole proprietorship are the adequacies of credit and capital for the business is relatively small. The sole proprietor doesn’t share any responsibilities. ADVANTAGES * It is very easy to start a sole proprietorship. * State and local licenses and permits are the only legal forms needed. * A sole proprietor can start and terminate a business for whatever reason. * Work cannot be criticized by any bosses. * Decisions do not need to be made with a partner. DISADVANTAGES * The owner of the sole proprietorship, capital is limited by personal finance. * Fund raised from outside investors is difficult for a sole proprietor. * Talents and ability of a sole proprietor is limited. * If the owner gets sick or disable, the sole proprietor’s business will possibly decline. * Unlimited and unshared liability is the responsibility of the sole proprietor. GENERAL PARTNERSHIP With a voice in how the company is operated, each partner is fully active in the general partnership. The scope of all business activities are acted on...
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...Sole proprietorship The sole proprietorship is the simplest form of business entity. Single person carrying on a business for profit. The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. The sole proprietorship is a popular business form due to its simplicity, ease of setup, and nominal cost. A sole proprietor need only register his or her name and secure local licenses, and the sole proprietor is ready for business beginning and ending the business venture are uncomplicated steps requiring little more than the decision of the sole proprietor This can be an advantage, especially when the proprietor is not certain whether he or she will wish to continue the venture for any significant length of time and thus is unwilling to spend much money on filings, legal drafting, and the like. Disadvantages: The sole proprietorship does not have any legal existence separate from that of its owner. It also removes any shield from liability that might otherwise protect the proprietor. Thus, the proprietor is personally liable for all obligations of the business Partnership In contrast to general partnership law, a limited partnership is not dissolved by the death of a limited partner, and a limited partner may not compel dissolution of the partnership absent contrary provisions in the partnership agreement partners in general partnerships are jointly and severally liable for all obligations...
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...Forms of Business When beginning a business venture, the first and most important decision made by the owner is to review the forms of business options and determine which one would be suitable for the organization of their company. There are seven forms of business that will be discussed and different scenarios that will be developed in which each of these forms of business would be the preferred form. The seven forms of business are sole proprietorship, partnership, limited liability partnership, Limited Liability Company, S corporation, franchise, and corporate form. The selection depends on many factors – Each of these forms of business has advantages and disadvantages for the entrepreneurs (Cheeseman, 34). Each scenario will also include why the corresponding business form is most preferred. Sole proprietorship Sole proprietorship is the simplest and most common form of business (Cheeseman, 530). This form of business would be appropriate for a single business owner. The business owner would be the sole proprietor in this situation. The sole proprietor would be the only decision maker on how to conduct their business, as well as would be held liable for all activities within their business and cold be at a loss for all assets if the business is not successful. For example, Kelly opens a hair store as the sole proprietor of the business. She handles all contracts made for her and to any employees that she may hire and receives all profits made from the business. Should...
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...person or persons choose to start a business, many factors must be considered when deciding the type to create. Some of the factors include liability, taxes, continuity, control, profit retention, location, and other requirements. Sole Proprietorship – A sole proprietorship is the most commonly formed company in the United States. It is the easiest to create since the owner simply begins to conduct business transactions. It is beneficial to the owner because he remains utterly autonomous. There is no difference between the owner and the company. Disadvantages of a sole proprietorship include unlimited liability and inability to raise working capital. 1. Liability – This form of business has unlimited liability. All of the owner’s person assets can be taken by business creditors. Life insurance is the only asset that is protected by law. 2. Income taxes – All income is taxed as personal income. For this reason, sole proprietorships usually pay the highest rate of income tax. The owner of the business will file Form 1040 with a schedule C. It is possible to reduce the tax liability by claiming expenses incurred as a result of doing business. Expenses can also include depreciation of business equipment. 3. Longevity or continuity of the organization – The owner may choose to exit at any time for any reason by concluding any existing contracts and ceasing to take on other business. If the owner dies, the business is dissolved automatically. In this...
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...The Form of Your Business The dynamic creation of Funn Timez was form by three intelligent people; Dominick Batiste, Emily Burkett, and Danton Lee. We decided to create a general partnership where each of us will invest our own money and start a business. The partners of Funn Timez all agreed on having joint authority and joint liability. Being said, we understand the responsibilities if the company gets sued for injuries or harassment issues. Also providing personal income to sustain our business if for any reason isn’t successful is another responsibility. There can be reimbursement for our personal income that was invested into the company. Our business is a private establishment and WILL NOT be sold or bought, unless there’s a mutual agreement with the proper accommodations. We have developed a written contract agreement that discusses our partnership with Funn Timez. Although we all have equal investments in the company and equally shared profits, our responsibilities and duties are all different. So requirements and expections are more complex than others we will still be fair and reasonable. Sometimes this may cause a little frustration and/or disagreements as we know, but we are up for the challenge. This agreement also states possible business seperations or voted out situations if one partner is not dedicated or slacking and costing the business to fail. If this happens there will be possible openings for new partnership that meets our previously discussed criteria...
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