Business Structure Advice

Business Structures

Brian McMorris

FIN/571

March 23, 2015

Junius Jaubert

Business Structures

One of the initial steps to take when beginning a business consist of choosing the structure of the company. There are numerous business structures existing to new business owners, from functioning as a partnership to creating a corporation. Each of the business structures has its individual legal and tax consequences. Your business objectives will have great influence on determining the most appropriate business structure to use.

Sole Proprietorship

Sole proprietors have limited formalities to follow and very little guidelines to adhere to from, local, state and federal administration. Since there is only one owner, no profits have to be divided which lets a sole proprietor use company assets in any manner. One immense advantage of a sole proprietorship is the unlimited level of autonomy the owner has to maneuver his business. However, a key disadvantage of a sole proprietorship is the absence of liability protection for the owner of the business. This means a sole proprietor has a personal obligation to pay every business debt and commitment.

Partnership

A partnership of two or more entities has the ability to work together as partners. Partners can share the accountability of running the corporation and share ideas with other partners. Also, partners are not obligated to file income taxes as a corporate entity, so each partner has to report their share of business profits and losses on their personal income tax return. The downfall is, a partnership does not offer protection for partners of the business. A partner could even assume liable for the neglectful acts of one of its partners. If one of the partner’s obligations are not covered, a creditor has the ability to pursue a partner’s individual assets as reimbursement for the business debt.

LLC

A limited liability company provides members with limited...