Business Structure

Business Structures

University of Phoenix

FIN/571- Foundation of Corporate Finance

November 18, 2014

Dr. Jose Berrios-Lugo

Business Structures

For every business out there we will find a business structure that suit the owner’s needs. Business structures can be divided in three basic categories; Sole Proprietor, Partnership and Corporations. There is also under de Corporation category the S Corporation or S Corp. and the Limited liability Corporation (LLC). Base on the information from the U.S. Small Business Administration (SBA) there are six types of business structures with different legal and tax implications (U.S. Small Business Administration, n.d.).

The first one is the Sole Proprietor which is the most basic of all business structures have some pros and cons like all other structures. For the sole proprietor the main advantage is the profits, because he don’t have to share them with no one else, he is in control of the decision making for the business and is fully independent. It is the cheapest one of all business structures but in the downside all the losses also goes to the owner and all the tax responsibility, for some businesses the business dependents on the owners life or health, some owners will need help from experts on some problems if he or she don’t have the expertise on it to make decisions in his own business. Then we have the Partnership that involved two or more people who will share the profits and the losses of a business along with other responsibilities. The advantage of the partnership is on the tax burden of profits and in the initial part of the business because each partner have to contribute in all aspects of the business in certain way. The partners make a legal agreement including but not limited: how profits will be divided, how problems will be solve, new partners, and buy outs. There are three types of partnerships: the general partnership, limited partnership and the joint ventures. One of the best advantages of...