Entreprenuership Final

What are some basic questions to ask when deciding on legal form of a business? What are some of the features and differences among proprietorship, partnership, corporation, and Limited Liability Company?

The most important questions that I think need to be asked all start with “what if”. Starting a small business is such a challenge that you always need to be prepared for whatever may come your way. The business legality may change from company to company or industry to industry.

A sole proprietor may be good for a one man business starting out with possibility to expand into an LLC or corporation in the future. If there is more than one, a partnership may apply. A lot of times, this is only filed for tax purposes so you can be recognized by the state at doing business. You would file a DBA “Doing Business As” and this would allow you to expense materials, equipment and any financial costs you may have while attempting to generate business. Either of these would be a bad choice if you are offering a labor service to a customer or you invite customers onto your property. The reasoning being that you are not covered for any legal action against the business. For instance, say you own a restaurant and you are a partnership. A customer slips in your restaurant due to your employee spilling a drink. That customer can come after you and your partner’s personal belongings such as your house and any other personal assets you may have. I would only recommend a sole proprietorship or partnership for a business such as an accountant, law firm or something of that nature.

A corporation is usually defined as a larger company but can also consist of only one person. This is essentially a business that may offer stocks to shareholders and open investments. When shareholders are involved you will typically see a board of directors that’s best interest is that off the shareholders. There are three major types of corporations (Close corporations, C corporations and S...