...Business Structure Advice Dear John Owner, Starting a business is a very big decision and will be one of the most challenging adventures that you will participate in. You emailed me asking for my advice concerning business structures and how to proceed given your newly devised business plan. I have attached a table that I created that gives you the information you are looking for. The table contains the business structures that are most common, a brief overview of the structures, advantages, disadvantages, and possible tax implications of each business structure. I have put this information in table form with bullet points so that it is easy to understand. I believe that the information that I have given you will better help you make that important decision regarding the business structure of your company. Please look over the information below and consider all of your options carefully. There is no right or wrong answer when it comes to choosing a business structure. The right structure is the one that works best with your business plan and needs. If you have any questions regarding the information, please feel free to contact me anytime. Respectfully, Nichole Coates, Consultant Business Structure Type Overview of Structure Advantages Disadvantages Tax Consequence of Business Structure Sole Proprietorship • 75% of businesses make up this type of structure • One owner and small number of employees • Simple to start • Least regulated • Owner...
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...Business Structure Types for Forming a Business Business Law/LAW 531 Business Structure Types for Forming a Business When I person decides to be an entrepreneur, choosing the type of business structure that would be right for the business they plan to open can be a daunting task. The reason is being is that there are many different types of business structures a person can choose from. Before making the decision on the type of business structure for the business, there are a few things that should be done before hand. The entrepreneur would first need to have a business plan that will guide them on how they would start the business and run it successfully. Next they should get any necessary assistance or training on how to go about forming a business. Once this has been done, a business structure can be determined after researching each type of structure to see which would fit their business idea the best. In the process of starting a business, choosing the type of legal business structure for a business will be one of the most important tasks a new entrepreneur will do. The reason is that whichever structure is chosen will have an impact on items like taxes the entrepreneur will pay, the amount of paperwork required for the business structure picked, the personal liability the business will have, and the ability to raise the money for the business structure picked. When going forward with the formation of the business, a person will have to know...
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...Determining the business structure that best suits the needs of the business owner is a vital step. The type of business structure that a person employs may help to create a solid company, or may lead towards failure. To determine what type of business structure is needed, the potential entrepreneur must look at types of business structures available and decide on which one best suits the company. There are three basic types of businesses; sole proprietorship, partnership, and a corporation. Each offers its own advantages and disadvantages as seen in the table below. The first basic business structure is the sole proprietorship. "A sole proprietorship is a business owned by one person." (Parrino, Kidwell, & Bates, 2012, p. 6) This type of business structure is the largest type in the United States. This type of business structure offers several advantages including simplicity in startup, the proprietor keeps all the profits and has sole decision making authority, and sole proprietorships have lower income taxes versus corporations. However, there are disadvantages as well including sole responsibility for paying the bills and unlimited liability for all debts and obligations of the business. Additionally, the owner's personal wealth will limit the amount of equity capital that may be invested. The last major disadvantage is that transfer of ownership can be difficult as there is not stock or interest to sell. The second basic business structure is a partnership...
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...Business Structures Tasha Minnett FIN/571 September 29, 2015 Walter Corrigan Business Structures Opening a business requires a lot of thought and steps to take in making the business succeed. One of the first steps in opening a business is deciding what type of business structure will be best for the type of business that is being opened. There are five different types of business structures. Sole Proprietorship This type of business structure is owned solely by the owner and no one else. Sole proprietorships are also unincorporated. This means that the owner is at total liability for their business. Being unincorporated also means that the owner is taxed; the business is not taxed separately. Although one of the up sides to this type of business structure is that the business is run completely the way the owner wants to run it, they only have to answer to government and state regulations. Another upside is that it is the cheapest business structure to form. Partnerships A partnership is when two or more people come together to own a business. This type of business is also unincorporated which again means that the owners are at total liability. The taxation for the business is also done through the owners; each owner includes their share of the business’ gains or losses in their tax returns. Having partners has its pros as there are more people to share in the liability and more people to help make the big decisions with. Partners also bring a balance in ideas,...
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...Business Structure Advice Rebecca Hardy FIN/571 - Corporate Finance 22 September, 2014 Professor Gurpreet Atwal Dear John Owner, Thank you for allowing my consulting firm to give you the information that you will need to make a sound decision as to the type of business structure that will meet your needs. The three main types of business structure are sole proprietorship, partnership, and corporation. In the next few sections I will explain each type and describe the advantages, disadvantages and tax implications that you would encounter if you selected that type. Let’s begin with the sole proprietorship. Sole Proprietorship The sole proprietorship is the easiest and most cost effective type of business structure to set up, so if funding is a concerned this business structure may be the best route to take. The only cost associated with starting a sole proprietorship the cost of obtaining a business license and the normal startup expenses. With the sole proprietorship the owner is only taxed once on the business’s income. However, one of the major disadvantages of the sole proprietorship is the unlimited personal liability that the sole proprietor faces. In the event that the business cannot generate enough cash flow to pay all of its financial obligations the owner becomes personally liable for all debts. This means that creditors can file lawsuits against the owner’s personal property as well as the business in order to seek repayment for services, loans...
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...tHE NATURE AND STRUCTURE OF A BUSINESS BUSINESS AND ENTERPRISE tHE NATURE AND STRUCTURE OF A BUSINESS BUSINESS AND ENTERPRISE Page Number | Contents | 1 | Contents | 2 | Executive summary | 3 | Introduction | 3 | Ownership Structure | 4 | Summary | 4 | Conclusion | 5 | Resources | 6 | Resources | 7 | Resources | | | Executive Summary: The task ahead is to plan, investigate and create Mark and Jodie’s business. There will be thorough investigation to solve the best ownership structure and why. The types of ownership structures that have been over looked include partnership and sole trader. These types of ownership structures could both be very useful for their type of business. Their plan is too start off small and then grow their business with their children. This has to be taken into consideration when deciding on what type of businesses structure is chosen. The information has to be collected from a wide range of Primary and Secondary resources. Introduction: A married couple who have two children are interested in creating a new business, providing a winery bus tour for their local area. Mark and Jodie have a plan to start off small and one day grow into a larger business. Mark would like to start off with a 13 seater van but then over the long term would like to be larger and offer coach tours to wineries all over Australia. Jodie, the wife, would be working in the business as well as hopefully their children one day. The ownership...
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...Business Structure Advice FIN/571 April 11, 2015 Dear John Owner, Congratulations on your decision to start a business. It is definitely a smart idea to be aware and analyze the different business structures, their tax implications, and where the investments come from. You do have several options to choose from, and each of them have both advantages and disadvantages. Some of your options include several types of corporations, partnerships, and sole-proprietorship. The first possible business structure is one of the types of corporations. The General Corporation is the most common type of corporate structure. The characteristics of a general corporations include being a separate legal entity, owned by stockholders (an unlimited number), that are protected from business creditors. One option is a type S Corporation, which is actually a type of General Corporation that has a special IRS tax status. It is popular with small businesses because they are charged as if they are sole proprietors, as well as combining tax advantages of a sole proprietorship with that of a corporation. Depending on the type of business you plan on starting, this may be an option for you. An advantage of the corporation is that the individual’s personal assets are protected. A disadvantage is that you have to share the profits with all of the stockholders. Another type of business structure that you could form is a Limited Liability Company, or LLC. There are fewer restrictions and...
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...Organizational Structure Analysis After discussing with Team A, we were impressed by John Whybrow’s video and his experience from switching from a functional organization to a line of business. The changes that his company was faced with were very exciting, better communication, better results, and impressive behaviors. The first functional organization that was discussed in the video was the line of business organization. This was the top to bottom structure that had all employees, divisions, and leadership in the same communication ladder. The second was functional organization. In this type, the business is split up by certain aspects of a given task. It could be departmental, or just a product or idea that the team is working on. The biggest problem with this is that upper management would need to take more time to see what the bottom line was, or what the issue is with the business. All other business functions would be only looking at what is seen within the division. For the line of business function, there would be many different managers looking from the top down for financial analysis. There a four types of horizontal structure organizations. They are functional, divisional, matrix, and network. They each have their own unique way to structure a business, and each have pros and cons to them. This first type is the functional organization. An advantage of a functional organizational structure is that it offers a high level of specialization. Each unit operates...
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...Business Structures FIN/571 Corporate Finance May 12, 2014 Business Structures Business structures are used depending on the type of business that is being formed. According to the Small Business Administration, there are six types of business structures that are based on the needs of the business that if being formed. The six types of business structures are Sole Proprietorship, Partnership, Cooperative, Limited Liability Company (LLC), S Corporation, and Corporation. Each business structure offers both positive and negative aspects that must be weighed by the business owner to find the best fit. A sole proprietorship offers the easiest form of business structure. There is only one owner that is entitled to all profits made by the organization. On the down side, there is little distinction between the business and the owner. The owner of a sole proprietorship may receive all profits from the business but is also personally responsible for all debts that go along with the company. Partnerships offer business owners a way to split the liability that goes along with owning and operating a business. However, a negative aspect of this would be the requirement to share a predetermined percentage of the profits that are made by the business. There is also the chance of having disagreements when it comes to business decisions because there are multiple parties involved in the organization. Cooperatives are formed based on the needs of the business members. Profits are distributed...
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...Business Structures One of the first steps before starting business should be choosing the proper business structure of the company as each type of business structure will have its own legal and tax implications. The types of business structures include sole proprietorship, partnership and corporation. Sole Proprietorship A sole proprietorship is the most common type of business in United States. This type of business typically consisting of the proprietor and a handful of employees. In Sole Proprietorship business type, the owner of the business is entitled to all profits and handles all your business’s debts, losses and liabilities. The advantages of Sole Proprietorship include complete control of the business, Ease and inexpensive to forming the business and easy tax preparation as Sole Proprietorship is not taxed separately. Disadvantages for this type of business include unlimited personal liability, hard to raise capital and heavy burden as you handle success or failure of the company. Partnership A partnership consists of two or more owners who have joined legally to manage a business. Partners of the business contribute to all aspects of the business, including decision making and raising money for the business. To form a partnership business, all owners enter into an agreement with all the roles and responsibilities of each owner. They also agree on how profits are shared and how ownership will be transferred in case of specified events, such as the retirement...
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...Explaining Basic Accounting Concepts and Business Structures ACT/537 January 9, 2012 Explaining Basic Accounting Concepts and Business Structures A solid understanding of basic accounting is arguably one of the most essential skills future businesses leaders require for success. The business world operates to make a profit, and in order to do so, managers must understand the numbers. Managers from marketing, production, management, or information systems should each understand fundamentals of accounting and business structures to be more effective in their respective departments (Kimmel, Weygandt, & Kieso, 2007). In an effort to help facilitate this understanding the following paper will attempt to identify and describe sources of generally accepted accounting principles, (GAAP) with a highlight on why hierarchy is important, describe effective accounting information using the qualities of accounting information, describe how an accrual based accounting system is different from a cash basis of accounting, and describe types of business structures and the defining features of each structure. Sources of GAAP An essential accounting concept business managers should understand is the hierarchy of the GAAP. GAAP are common accounting procedures that organizations use to prepare their financial statements. The standards outlined by the GAAP are the basis for accounting in the United States (Pounder, 2011). It is essential managers understand the GAAP hierarchy...
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...Business Structure Advice Corporate Finance/571 Robert Freitas, Jr August 11, 2014 From: Sent: December 2, 2012 To: John Owner CC: Subject: Advice in starting your business Business Structure Advice Dear John Owner, Starting a business is an extremely important decision and will be a very demanding venture that you will partake in. You ask for my advice regarding business structures and how to continue given your recent formulated business plan. I have enclosed a chart that I generated that provides you with the information you requested. The chart includes the business structures that are frequently established, an overview of the structures, advantages, disadvantages, and tax information of each business structure. I have input this information on a simplified chart, so that it is easy to understand. I trust that the information that I have provided you will be beneficial to you regarding the business structure of your company. Please look over the information provided below and take into account all of your options thoroughly. When choosing a business structure, there is no right or wrong structure that works best with your business plan and needs. If you have any questions regarding the information, please feel free to contact me anytime. Respectfully, Tonya S, Consultant Business Structure Type Overview of Structure Advantages Disadvantages Tax Consequence of Business Structure Sole Proprietorship • 75% of businesses...
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...Covel, my main take-away was that business owners and future entrepreneurs should always research and understand all possible business structures prior to starting a business. The example of Susan Hartzler illustrated the ideas mentioned in my main take-away. Susan Hartzler “did not know to ask” an advisor about how to set up a business structure that best suits her needs and therefore lost personal assets when she faced bankruptcy (Covel 1). The actions of Susan show how important it is to recognize that each business structure has its risks and how important it is as a business owner to comprehend these in order to protect oneself from losing any personal assets. Prior to reading the article, I believed that a Limited Liability Corporation was a type of structure that prevented the loss of personal assets in bankruptcy. However, after reading the article and being informed about Mr. Tardiff and Ms. Watson-Tardiff’s case, I learned the most about limited liability corporations because it went against my original understanding of this type of business structure. I did not realize that, despite a business being an LLC, banks require the guarantee of a personal asset like a car or home in order for a business owner to get money to run or start their business. I believed a loan under the name of the business did not require such a guarantee from the business owner. However, by learning that personal assets are often tied to loans taken out by a business owner in an LLC, I was taught...
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...Business Structures Fin/571 Business Structures This week we learned about the different business structures to consider when establishing a business. It is important to note the advantages and disadvantages of each business structure when planning a business. The main business structures include sole proprietorship, partnership, and corporation. Sole Proprietorship Sole proprietorship is a business owned by one person. It is the easiest, least expensive, and least regulated business structure to start. The advantage of a sole proprietor include not having to share the profits or control of business decisions with anyone else. However, the disadvantage is that sole proprietors have unlimited personal liability for the business debts and obligations. Partnership. A partnership business agreement legally formed with two or more owners. The agreement specifies the amount of capital each partner contributes, division of profits, the role of each partner, decision-making process, and transfer of ownership in specified events. The advantage of more than one owner is an increase in capital or borrowing capacity, added knowledge and skills from each of the partners. There are two types of partnerships general and limited. General Partnership-a disadvantage is unlimited liability of all the general partners, partners who manage the daily activities of the business, regardless of the amount of capital each contributed. Limited Partnership- partners, who are not...
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...Choosing a Business Structure Effie Dodge BUS311: Business Law I Instructor: Brandy Kreisler July 28th 2014 BUS311: Business Law I Choosing a Business Structure When deciding to open a business it is important to define the businesses structure. A business structure is the outline of a company’s operation plans and goals. Without a structure a company would fall apart. Therefore the first step in opening a business is to choose a business structure. In this paper we will discuss the different business structures and which structure fits my business the best. Business structures vary and there are six structures. However in this paper we will only discuss four: sole proprietorship, partnership, LLC, and a corporation. A sole proprietorship is the most common business structure. This type of structure has one owner who is entitled to all profit and accrues all the losses. In forming a sole proprietorship there is no formal action. As long as there is only one owner it is easy to form a sole proprietorship. With the proper permits and license one can have a sole proprietorship structured business. Within this structure taxes are not separate. Profit and losses are reported on one’s personal taxes. This business is fairly inexpensive to form and the owner has complete control. However there is a downfall to sole proprietorship. Because there is not separation between the owner and the company the owner can be held personally responsible for any liabilities accrued...
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