Legal Forms of Business
Legal Forms of Business: Week 2
Legal Forms of Business In business, the first decision that is made is usually the most difficult. When making business decisions, the owner must decide what types of business organization is the best for the company. There are seven forms of business that will be discussed as well as scenarios in which each of these forms of business would be the preferred form. This paper will also justify why the corresponding business form is preferred. The forms that will be discussed are: sole proprietorship, partner, limited liability partnership, Limited Liability Company, S corporation, franchise, and corporate form. Sole Proprietorship A Sole Proprietor is someone who owns a business by himself or herself. The sole proprietorship is the oldest, most common, and simplest form of business. In this organization, the business is owned and operated by one person. This form is excellent for first time business owners whose business will remain small. Scenario: In most small towns, there are neighborhood stores or what some like to call “mom and pop” stores. When entering these stores, customers are usually greeted with the same owner. In this case, if opening a new store in the neighborhood, one would most likely use the sole proprietorship form. This form is best because they have few legal requirements and there are no legal documents needed. Partnership A partnership is very similar to a sole proprietorship. In a partnership, there are usually two or more owners of the business. What separates the partnership is that it can hold property and incur debt in the business’s name. One of the greatest drawbacks of a partnership is that one partner can be held liable for the acts of the other partner. This alone can increase personal liability. Scenario: There may be two licensed professionals who decide to go into business together. The two will share profits and liabilities. There would be an
Legal Forms of Business In business, the first decision that is made is usually the most difficult. When making business decisions, the owner must decide what types of business organization is the best for the company. There are seven forms of business that will be discussed as well as scenarios in which each of these forms of business would be the preferred form. This paper will also justify why the corresponding business form is preferred. The forms that will be discussed are: sole proprietorship, partner, limited liability partnership, Limited Liability Company, S corporation, franchise, and corporate form. Sole Proprietorship A Sole Proprietor is someone who owns a business by himself or herself. The sole proprietorship is the oldest, most common, and simplest form of business. In this organization, the business is owned and operated by one person. This form is excellent for first time business owners whose business will remain small. Scenario: In most small towns, there are neighborhood stores or what some like to call “mom and pop” stores. When entering these stores, customers are usually greeted with the same owner. In this case, if opening a new store in the neighborhood, one would most likely use the sole proprietorship form. This form is best because they have few legal requirements and there are no legal documents needed. Partnership A partnership is very similar to a sole proprietorship. In a partnership, there are usually two or more owners of the business. What separates the partnership is that it can hold property and incur debt in the business’s name. One of the greatest drawbacks of a partnership is that one partner can be held liable for the acts of the other partner. This alone can increase personal liability. Scenario: There may be two licensed professionals who decide to go into business together. The two will share profits and liabilities. There would be an