BUSINESS STRUCTURES
Business Structures
Glenn Wilson Boerstler, II
FIN/571 Corporate Finance
August 18, 2014
Professor Susanne Elliot
A business can be organized in one of several ways, and the form its owners choose will affect the company’s’ and owners' legal liability and income tax treatment. Business structures are selected based on the type of business and the intentions of the owner or owners. According to the Small Business Administration, there are six types of business structures that are based on the needs of the business that if being formed ("Choose Your Business Structure", 2014). The six types of business structures are Sole Proprietorship, Partnership, Cooperative, Limited Liability Company (LLC), S Corporation, and Corporation. Each business structure offers both positive and negative aspects that must be weighed by the business owner to find the best fit (Spadaccini, 2014).
A sole proprietorship offers the easiest form of business structure. There is only one owner that is entitled to all profits made by the organization. On the down side, there is little distinction between the business and the owner. The owner of a sole proprietorship may receive all profits from the business but is also personally responsible for all debts that go along with the company (“Complete Guide to Corporate Finance” 2014). Sole proprietorships are not ideal for high-risk businesses because they put your personal assets at risk. One of the biggest advantages of a sole proprietorship is the ease with which business decisions can be made.
Partnerships offer business owners a way to split the liability that goes along with owning and operating a business. In a general partnership, all partners are personally liable for business debts, any partner can be held totally responsible for the business and any partner can make decisions that affect the whole business. Partnerships must file information returns with the IRS, but they do not file separate tax returns (“Complete Guide to Corporate
Glenn Wilson Boerstler, II
FIN/571 Corporate Finance
August 18, 2014
Professor Susanne Elliot
A business can be organized in one of several ways, and the form its owners choose will affect the company’s’ and owners' legal liability and income tax treatment. Business structures are selected based on the type of business and the intentions of the owner or owners. According to the Small Business Administration, there are six types of business structures that are based on the needs of the business that if being formed ("Choose Your Business Structure", 2014). The six types of business structures are Sole Proprietorship, Partnership, Cooperative, Limited Liability Company (LLC), S Corporation, and Corporation. Each business structure offers both positive and negative aspects that must be weighed by the business owner to find the best fit (Spadaccini, 2014).
A sole proprietorship offers the easiest form of business structure. There is only one owner that is entitled to all profits made by the organization. On the down side, there is little distinction between the business and the owner. The owner of a sole proprietorship may receive all profits from the business but is also personally responsible for all debts that go along with the company (“Complete Guide to Corporate Finance” 2014). Sole proprietorships are not ideal for high-risk businesses because they put your personal assets at risk. One of the biggest advantages of a sole proprietorship is the ease with which business decisions can be made.
Partnerships offer business owners a way to split the liability that goes along with owning and operating a business. In a general partnership, all partners are personally liable for business debts, any partner can be held totally responsible for the business and any partner can make decisions that affect the whole business. Partnerships must file information returns with the IRS, but they do not file separate tax returns (“Complete Guide to Corporate