Business Organization Form Choice

In: Business and Management

Submitted By obay53
Words 3225
Pages 13
To: Mr. XYZ
From: ABCD
Date: 06.05.2015
Subject: Research on the right form of business entity

Mr. XYZ,
Conducting thorough research on the plausibility of choosing a specific form of legal business entity form for a certain specific business, several facts have been learned. I have been able to understand why it is always very much needed to know and verify the right form of legal structure to be applied to a business before actually setting up the business and carry on with its operation. As the business of my desire must have to be established in the state of Florida, the primary research has been thoroughly based on the legal requirements of setting up any form of business in the concerned state. The desired form of business is a bookstore.
The basic task before setting up any business calls for determining the legal structure that will suit the business in an appropriate manner. Several options, in this regard, have been explored by me. This exploration has made it possible for me to ultimately choose the right kind of legal structure befitting the bookstore business. I have explored the different forms like sole proprietorship and partnership, and not the forms like a limited liability (LLC) and a corporation. I have not thought it right to go deep into the structural details of such legal forms of business because I have never thought of investing that much in my business. In the course of my research I did look for gaining more knowledge about sole proprietorship form of business. I have learned that sole proprietorship is a business “that legally has no separate existence from its owner. Income and losses are taxed on the individual’s personal income tax return” (“Sole Proprietorship”, n.d.). It is the simplest form of business compared to other legal forms of business and it is not a legal entity and “it simply refers to a person who owns the…...

Similar Documents

Forms of Business

...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......

Words: 1295 - Pages: 6

Forms of Industrial Organization

...Forms of Industrial Organization Forces Influencing Business in the 21st Century MMPBL/501 May 16, 2011 Introduction The goal of any company is to compete and be profitable because in the free market economy all the company needs is demand for their product. The market structures allowed companies to compete and market their products in four different markets pure competition, pure monopoly, monopolistic, and Oligopoly. Some companies like McDonalds have a strong brand and powerful easy to recognize nationally and internationally. McDonalds have found ways to be more efficient keeping their prices low which ensures their profit in the long run. The Electric companies compete, and more than one electric company helps to keep the cost of energy. Other companies compete with exclusive, geographical products like wine, organic foods, shoes, or furniture. The profit in this type of companies is short run, unless they find new ways to cut cost, and become more efficient (Hartman, 2011). Oligopoly Competition Because the number of sellers in an oligopolistic industry is small, the decision of one firm will influence the demand, price, and profit of rivals. The distinguishing uniqueness of an oligopolistic market of rivals is small in number (Southwestern, 2003, p. 259). McDonald’s has no boundaries concerning good food, prices, and fun with more than 32,000 locations in 100 countries around the world (2010-2011, McDonald’s). McDonald introduced the one dollar......

Words: 1351 - Pages: 6

Forms of Business Organization

...Forms of Business Organization Forms of Business Organization Have you ever imagined who commences the required capital, takes the accountability of arranging assets and other resources, operates them into practice, and controls and coordinates the operation to earn desired profits? If you search around, you will find a manufacturing business owned and operated by a single individual, who executes all these operations. It is significant for business owner(s) and manager(s) to comprehend the legal environment, in which their business(s) operate, not merely with regard to their own businesses however also as regards to other companies with whom they are doing business. In this context, there are six forms of business organizations, which are discussed below: a. Sole Proprietorship • Control Sole proprietorship is also termed as a sole trader. It is a form of business, which is owned and controlled by single individual and is the simplest form of business organization. The single owner of business has entire ownership and control over the assets and capital invested in the business and he or she is individually responsible (subject to some restrictions) for the expenses and liabilities of the business. • Liability A different advantage, nonetheless, is that the proprietor of this business form is responsible for all the business liabilities. Therefore, if a sole owner business undergo into financial crisis, creditors can originate lawsuits against the sole......

Words: 2123 - Pages: 9

Forms of Business Organizations

...Forms of Business Organizations AIU Online FINA310 Unit 1 DB Charlotte Taylor 06.09.13 Within the business world there are numerous forms of businesses global and domestic. Therefore, choosing the right form of ownership can be hectic. Although, there are numerous choices to make I hope to make the decision less hectic by discussing some advantages and disadvantages of three of the most common forms that may be right and profitable for the business. The three legal forms are: (sole) proprietorships, partnerships, and corporations. Sole proprietorships are owned by an individual who makes all the decisions about the business and therefore, pockets the revenue that is made. Sole proprietorships are the most common form of business that represents one individual owner with few legal responsibilities or requirements. Other advantages of forming a proprietorship is that they are easy to form, operate, and more affordable to form. Simply put, a sole proprietorship is a simple form of business; unfortunately, there are disadvantages for the individual. Some disadvantages are: the loss of tax-free benefits; the owner can be sued since the owner and business have become one; unlimited exposure to the owner; and the owner is responsible for all legal debts and issues that is accrued by the business and risk the loss of personal assets (AIU Online, 2013; Brooks, 2013). Partnerships are quite similar but different in their own way; a partnership is formed by two or more......

Words: 716 - Pages: 3

Business Organization Forms

...ACC 561 Jared Jones Forms of Business Organization Introduction There are four ways that a business can organize itself. The owners and partners in this newly formed business may share in a variety of responsibilities and must decide which form their business should take on. The four basic ways a business can be organized is a sole proprietorship, partnership, C corporation and S corporation. There are a variety of advantages and disadvantages to each. When it comes to Tax implications, Legal implications and Accounting implications this is especially true. Below is an analysis of the various forms of business and the advantages and disadvantages to each, along with various implications associated with taxes, legality, and accounting. Sole Proprietorship Sole Proprietorship is a type of business run by a lone individual. This individual owns the business, and deals solely with all of the losses and all of the profits. The owner also is responsible for all of the liability and has complete control of business operations (Carr, 2011). Typically the business will have an income statement and a balance sheet. The owner through personal income tax return pays all taxes for the business. There are several advantages to this form of business: It is generally not difficult to organize due the requirements of registration not being as harsh to abide to and the financial capital is relatively small. Also, the sole owner has the ability to make all decision for the......

Words: 1353 - Pages: 6

Business Organization Form Choice Memo

...Business Organization Form Choice Memorandum Erin P PLAW 350 December 9, 2013 Memorandum To: Professor From: Erin P. Date: October 23, 2013 Re: Business entity form and federal tax regime choice of Erin P Photography ------------------------------------------------- As per our conversation on November 29, 2013, in regards to the firm’s new client, Erin P Photography, I have compiled the following information of your review. In this memorandum you will find that I have thoroughly examined the most viable options of business entity formation for Erin P Photography to show that forming a limited liability company would be the most appropriate choice for our client. I then examined the available options of federal tax regime selection for limited liability companies to find that federal taxation as an S corporation is the most appropriate and beneficial choice for the firm’s new client, Erin P Photography. The client, Erin P, came to the firm last week seeing guidance in legally establishing her own photography business. Ms.P requested that our firm handle the initial legal set up, but did not know what businesses entity form would be the best choice for her new enterprise. Ms. P was also unsure as to how the new business should be taxed under federal guidelines to best suit her interests. Ms. P did provide information as to her new business, Erin P Photography. Ms. P would be the sole employee, and preferably sole owner, of the business at inception and......

Words: 3208 - Pages: 13

Forms of Business Organizations and Key Characteristics and Differences

...Chantelé Shaw LIT1: Task 310.2.1-01-06 Forms of Business Organizations and Key Characteristics and Differences Student # 000258452 6/12/12 Part A The Report Sole Proprietorship A sole proprietorship is a privately owned business, that is owned by one person who has unlimited and unshared liability. The proprietorship, since managed by one person, has no need for any type of agreements or formalities. The self-governing aspect of the sole proprietorship, allows for the owner to make decisions on their own without criticisms and the complexities of added decision makers such as other managers or board members. A major benefit that is 3 fold is the impact of the financials of the company and the pockets of the owner. The proprietor is able to enjoy all of the profits from the company. Costs of doing business or expenses lead to tax breaks and the ability to, in essence, charge off expenditures. The advantage of pass through taxation is important to the “laid back” nature of managing a sole proprietorship. A simple profit and loss statement can be submitted along with the owner’s annual tax return and it is considered sufficient to the Federal Government. These proprietorships are very easy to start and just as simple to terminate. Once the owner has satisfied all contracts, it can be decided to take on no more work and terminate the business. Although the benefits are nice the disadvantages are just as cruel when it comes to the business. The downside to the......

Words: 2552 - Pages: 11

Business Forms

...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......

Words: 2226 - Pages: 9

Legal Forms of Business Organization

...Liability Partnership, Corporation Paper Angelika Evanoff FIN/419 July 20, 2015 Mrs. Michele Huss Limited Liability Corporation, Limited Liability Partnership, Corporation Paper The purpose of this paper is to discuss three legal forms of business organization; a limited liability corporation or company, a limited liability partnership, and a class C corporation. The paper begins with a brief description of each structure, followed by a comparison and contrast of each form’s advantages and disadvantages. The author finishes by citing examples in which she would use each type of business structure if establishing a new business. It is important to choose the appropriate legal form of organization because the decision affects owner’s risks, raising money, and how profits are taxed (Gitman & Zutter, 2014). Readers can expect to have a better idea of the various options available to entrepreneurs after reading this essay. Legal Forms of Business Organization The three most popular structures of company organization are the sole proprietorship, the partnership, and the corporation. A sole proprietorship has one owner while a partnership has two or more owners, and a corporation is an entity created by law (Gitman & Zutter, 2014). The forms offer limited liability or unlimited liability to its owners. Various structures that provide limited liability include a limited liability corporation, limited liability partnership, and a class C corporation. A limited......

Words: 1062 - Pages: 5

Forms of Organization

...Business entrepreneurship 1. Sole proprietorship The sole proprietorship is the easiest business structure under which one can work a business. The sole proprietorship is not a lawful element. It essentially alludes to a man who possesses the business and is in charge of its obligations. The sole proprietorship is a mainstream business structure because of its straightforwardness, simplicity of setup, and ostensible expense. A sole proprietor needs to enlist his or her name and secure neighborhood licenses, and the sole proprietor is prepared for business. A unique drawback, be that as it may, is that the holder of a sole proprietorship remains actually at risk for all the business' obligations. Examples of sole proprietorship businesses are 1. General stores 2. Hair dressers 3. Dry cleaners 4. Free lancers 5. restaurant 2. Partnership A business organization in which two or more individuals manage and operate the business is partnership. Both owners are equally and personally liable for the debts from the business. Every accomplice adds to all parts of the business, including cash, property, work or aptitude. Consequently, every partner has share in the benefits and misfortunes of the business. Since associations involve more than one individual in the choice making process, its vital to talk about a wide mixture of issues in advance and build up a lawful association understanding. This understanding ought to record how future......

Words: 804 - Pages: 4

Partnership Form of Organization

...Partnership Form of Organization Partnership Form of Organization A partnership is an association of two or more persons to carry on as co-owners of a business for profit. Partnerships are sometimes used in small retail, service, or manufacturing companies. Also accountants, lawyers, and doctors find it desirable to form partnerships with other professionals in the field. Characteristics of Partnerships STUDY OBJECTIVE 1 Identify the characteristics of the partnership form of business organization. Partnerships are fairly easy to form. People form partnerships simply by a verbal agreement, or more formally, by written agreement. We explain the principal characteristics of partnerships in the following sections. Association of Individuals A partnership is a legal entity. A partnership can own property (land, buildings, equipment), and can sue or be sued. A partnership also is an accounting entity. Thus, the personal assets, liabilities, and transactions of the partners are excluded from the accounting records of the partnership, just as they are in a proprietorship. The net income of a partnership is not taxed as a separate entity. But, a partnership must file an information tax return showing partnership net income and each partner's share of that net income. Each partner's share is taxable at personal tax rates, regardless of the amount of net income each withdraws from the business during the year. Mutual......

Words: 2344 - Pages: 10

The Form of Business of Our Choice

...THE FORM OF BUSINESS OF OUR CHOICE There are different forms of business ownership which are Sole proprietorship, Partnership and Corporation or Company. We need to start an Audit Firm and we have decided to call it Group five Audit Firm. And Partnership is the form of business we have chosen. Partnership is the relationship among persons who operate a business together with a view to sharing profits on a mutually agreed basis. The following determined our choice of the form of business unit. Nature of the business activity; this is an important factor having a direct bearing on the choice of a form of ownership. In small trading businesses, profession, and personal services trades, partnership is predominant. Scale of operation; the second factor that affects the form of ownership of a business is scale of operation. Since the scale of operation of our Audit firm is modest neither too small nor too large, partnership is preferable. Capital requirements are closely related to the type of business and scale of operation. Partnership can often raise funds with greater ease, since the resources and credit of all partners are available. Degree of control and management that we desire to have over business, affected the choice of ownership of our business. In partnership management and control of the business is jointly shared by partners even then, they are legally accountable to each other. Degree of risk and liability; the......

Words: 2432 - Pages: 10

Forms of Business

...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......

Words: 2419 - Pages: 10

Explain the Advantages and Disadvantages of the Main Forms of Business Organizations

...The four main forms of business organizations namely sole proprietorship, partnership, C corporation, and S corporation have various advantages and disadvantages in terms of tax implications, legal status, financial obligations, and even set up time and compliance issues. A sole proprietorship is an individual based business. The advantages of sole proprietorship are various including the easiness to start and dissolve the company, the ability to have personal and complete control over the company, and the ability to retain all profits and include them in personal tax returns. Sole proprietorship has some disadvantages that include the owner’s unlimited liability over the company. The owner is legally responsible for all the debts of the company. Another disadvantage is that it is hard to raise funds because it depends on one person who might not have sufficient funds. It may also be difficult to attract high skills and professional employees because some would want to either have a high ranking position in the company or the chance to buy stock. Sole proprietors are also taxed more than corporation for example corporations pay 15% tax for income up to $ 50,000 while sole proprietors pay 15% (if filing married filing jointly) for income up to 35, 800 only. Financial statements for sole proprietorship are the income statement, the balance sheet, the statement of cash flows, and the statement of owner’s equity. In a partnership there are two or more owners. Partnership is......

Words: 667 - Pages: 3

3 Forms of Business Organizations

...What are the three forms of a business organization? What are the advantages and disadvantages of each form? For a corporation, what is the overall goal of the financial manager? Do you agree with this goal? Why or why not? In this discussion I will attempt to discuss what the three forms of business organizations are and discuss what the advantages and disadvantages are for each form. I will then explain what the overall goal of a financial manager is when it comes to a Corporation and if I agree with these goals. Depending on the types of classes that have been taken or if you are a business owner yourself, some of these questions should be somewhat common knowledge. Reading from the text book, there are three legal categories when it comes to a form of business. The three legal categories are partnership, corporations and proprietorships. Most businesses that are started our sole proprietorships. They are owned and operated by one person. Partnerships are owned and operated by two or more people and corporations are legal entities that exist independent of owners (Brooks, 2010). Proprietorships have many advantages. One is that it is easy and inexpensive to form and dissolve. For less than $100 you can get yourself a business license and be a new business owner and if you decide the next day you want to shut the business down, it is well within your power to do so. All of the profits also go to the owner and have direct control of the business. When it comes......

Words: 802 - Pages: 4