Business Types
L. Jones
Sole Proprietorships, Corporations, and Partnerships:
Just what are they?
One of the first decisions any individual or group of individuals must consider when starting or joining a business, is the legal form the entity will take. In the United States, as in many other countries around the world, the three main forms of business structures are the sole proprietorship, the corporation, and the partnership. Further, each type carries with it specific advantages as well as disadvantages.
In the first business model, the business is owned and operated by the individual. This means that, in effect, the individual in question is the "sole" owner and operator of the business. There are several advantages to this structure.
First, sole proprietorships are easy to form. In the sole proprietorship, there are few limitations on formation, and there are a small number of forms to complete, usually in the local governmental offices (city or county). Secondly, in this form, the business owner has sole control of any profits made by the business, and the owner has complete autonomy in decision making, on the spot management and flexibility, and relative freedom from government controls and complicated taxation. However, although there are several advantages to this form of business structure, there are also serious disadvantages.
One of the most daunting aspects of operating a sole proprietorship is the issue of liability. This is because in the sole proprietorship, the business owner is responsible for all of the debts, liabilities, and obligations of the business. The difficulty with this is that any debts or liabilities that are not met by the business assets must be met by the individual's assets -- including homes, cars, and personal savings. In addition to the...
Knowledge Integration Project 1A) Business owners must take a number of different factors into account when determining the form of business. They have to consider the sources and types of risk that the business takes, if there will be employees, and considerations about raising capital or splitting ownership, which can be quite a complex issue depending on the business. In addition, whether there will be any employees matters. Each jurisdiction has
Sole Proprietorship Before Referencing Family business structures In businesses that involve numerous members of the same family, the preferred business choice of conduct is the partnership. What advantages may occur for the family members by conducting business in this form? One of the advantages of constructing a joint proprietorship or partnership for a family business is that unlike a sole proprietorship, liability is divided equally between all family members.In other words, if the
("Definition of a Corporation") A fourth advantage of a corporation is that it is easy to raise various forms of financing. The structure of corporation allows it to be owned by large numbers of individual (shareholders). This is significant, because it means that a corporation can use the public markets to be able to raise investment capital. As a result, some corporations have the potential to raise billions of dollars
However, liability is limited to the corporation and offers owners' limited personal liability, which is something that is not found in a sole proprietorship or partnership (Corporation: Definition, Formation, Maintenance, 2012). Furthermore, a corporation is also considered to be a stand-alone entity that has separate tax liabilities; as such, the corporation is responsible for paying corporate taxes on any of the profits the company makes, however, each employee is
These elements are important, because they are showing how these kinds of entities are ideal for a group of individuals that will be directly involved in the business. As, they want to maintain operational control; but they want some kind of: division of labor, responsibilities and financial contributions. ("Incorporation") (Hernandez) This is similar to a proprietorship in that it is easy to establish and there are less regulations. However,
XI. Conflict of Laws Principles The unique nature of corporations creates interesting problems in regard to determining where a corporation can be sued or where the corporation can decide to file its own cause of action. A corporation can also elect to avail itself to the courts in the state in which it is incorporated and can also be subject to service in such state as well but the issue is
Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.
Get Started Now