Legal Forms of Business

Legal Forms of Business

LAW/531 BUSINESS LAW

When starting a business, the legal structure for the business must be chosen. It is necessary to understand how each legal structure works in order to make an informed decision. Many types of business structures are available, such as Sole Proprietorship, General Partnership, Limited Partnership, Limited Liability Company (LLC), to name a few. Although this may not be the first thing on the list when starting up, it is a decision that should be made, with the consideration of the taxes, management and legal liability. This paper will address the various forms available for one to choose from.

Sole Proprietorship is the simplest and probably the least expensive form. Sole Proprietorships do not have to register with local, state or federal governments with the exception of the Internal Revenue Service. Sole Proprietorship is one owner and there are no stock options. As sole proprietor a person owns everything, which includes the assets and debts. As a sole proprietor, the person can be sued directly in order for creditors to collect any and all bills due. All legal and contractual transactions are done by the owner not the company. Advantages of sole proprietorship include but may not be limited to, the ease of formation, low overhead and ease of control by the owner.

A General Partnership is a business, which consists of two or more owners bearing complete personal responsibility for the business that includes assets, operations and liabilities. The partnership does not have to be registered with the secretary of state. This type of partnership may be considered when each individual has something to offer the other balancing out the scale, which could make the business a success. Cash flow, knowledge and experience in the field, which they are entering are a few of the things each partner should bring into the partnership.

A Limited Partnership is generally formed by owners of a business to raise capital....