Forms of Business

Scenario: Sole Proprietorship-

For twenty years, Mrs. Smith has greeted and welcomed residents of Chula Vista at her local business, Little Smith's Flower Shop. She has operated this business independently and has no employees other than occasional help from her daughter Lilly. Lilly plans one day to take over her mothers business when she retires. Mrs. Smith opens and closes the flower shop which operates M-F from 9-5.

Having a sole proprietorship for this local flower shop "is the easiest and least expensive of the business structures to form." (Chron.com). This form of business is beneficial because the owner can operate the business for any amount of time and can decide to sell the business when they feel fit to do so. An owner operating under a sole proprietorship can also hand down the business to their children. Reporting income is less complex and is treated as personal income and you simply pay self employment taxes when you file your tax returns. A sole proprietorship gives the owner of the business full control without having to consult with outside investors when making decisions regarding the finances of the business.

Scenario: Partnership-

Dr. Kerry Netzi and Dr. Steven Haas are two local dentists that own and operate, The Tooth Fairy Children's Dental Clinic in Eastlake, California. They have been in business since they both graduated from Baylor School of Dentistry in 2001. Together they run their practice which operates M-S, 9-6. The business employs a total of four dental assistance and three front office personnel.

This arrangement would best be suited under a partnership. The dentist could collaborate with each other for business decisions and supervising of staff. The dentist could also share expenses related to their practice. The profits that the business produces are treated as income for both dentist and are only taxed once when filing tax returns. No formal paperwork has to be filed and the business partners...