Legal Forms of Business
There are many different forms of business in today’s society. One of the most important decisions an entrepreneur must make is deciding what type of business he or she wants to open. The entrepreneur needs to look at what liability and risks may the business encounter in the future. This paper will be discussing seven different forms of businesses such as; sole proprietorship, partnership, Limited Liability Partnership, Limited Liability Company, S corporation, franchise, and corporate with a scenario simulation for each form of business.
The first form of business we will discuss is the sole proprietorship. A sole proprietorship form of business ownership is one of the most popular and most frequently business forms. It can be simply defined as a single person who owns the business. ). A sole proprietorship is the simplest form of business (Cheeseman, p.530). In a sole proprietorship, the person that who operates the business assumes all tax penalties which include all liabilities, debts, profits, and losses. Some advantages for this business form are; being the single decision maker, receiving all of the profits from the business and lower start-up cost (inexpensive to create and operate) and the owner reports profit or loss on his or her personal tax return. Disadvantages of sole proprietorship are; the owner is personally responsible for debt, obligations and even liabilities committed by employee or investors.
A scenario of a sole proprietorship would be a person opening a small neighborhood candy store. This store would not be part of a chain. It can be managed by a single individual. The business form of a sole proprietorship would be best suited for this type of business because it is a great form of business for someone who has a small amount of money to invest in the company and to manage the business with one employee.
It is just like a sole proprietorship, except there is more than one...