Business Structures Assignment

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Business Structures
Gabriella Goodfield
FIN/571
August 31, 2015
Christopher Kubik
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Business Structures
Introduction
There are few business structures that a person can choose from when starting a business.
The business structures are sole proprietorship, partnership, and corporation. The main point is
each of this business structure are advantageous or disadvantageous.
Sole Proprietorship
Sole Proprietorship is advantageous is it is easy to start, fewer regulations, fees, and low
income taxes. The Sole Proprietorship business has the owner and a small number of
employees. There are no difficulties when getting the name of the business and the certificate. In
additional the cost are at minimal.
The disadvantage is that the owner has unlimited liability. Meaning the owner has pay
with his or her own personal wealth in case of creditors demanding for payment. In addition, to
transferring ownership is extremely hard to do. A sole proprietor is responsible for paying all
the firms bills and has unlimited liability for all business debts and other obligations of the firm.
This means that creditors can look beyond the assets of the business to the proprietors personal
wealth for payment (Parrino, 2012 pg. 7).
Partnerships
Partnerships is the business structure that has two or more owners. In United States 10%
of the business are partnerships. When starting up the partnership the owners will have an
agreement on how much money, they are investing into the business. The two types of
partnership are general partnerships and limited partnership.
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General Partnerships are disadvantageous because, like in the sole proprietorship, every
partner has the unlimited liability on the business debt and action. That all partners have to
answer to the business debts. This business structure share the same tax status, as the Sole
Proprietorship.
Limited Partnership is advantageous. This due fact that there are general partners and
limit partners. The general partners would have the unlimited liability and they would be the
ones who actively manage the business. They are the ones who have answer with their personal
assets or wealth if needed. Limited partners have limited liability. They would have to answer
only to the business obligations that is equal to their capital that invested.
Corporations
Corporations is consider the more complex of the business structures. Corporations is
15% of the business structures in that exist in the United States. The State charter authorizes
corporations where the business will be located. Corporations can be sue and they can sue a
person or another company. Unlike Sole proprietorships and partnerships, the corporation is an
entity in itself. Meaning that the owners are separate from the corporation. There is costly fees
that have to be paid when starting a corporation.
General Corporation is disadvantageous of the corporation business structure. One of the
main reason is the taxation. First, the owners have tax on the corporation and then they have to
pay tax on the dividends. The owner are stockholders and the receive dividends on the stock.
When starting General Corporations are difficult and the owners would need help with the steps
at the startup. The advantages is that owners personal wealth is protected from the business debt
and actions.
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Subchapter S corporation is advantageous because they have a special IRS tax status.
Meaning that they are tax just like in partnerships. There is a special expense tax status as well.
If a stockholder wants to leave, they can.
Limited Liability Company

The Limited Liability Company is advantageous. This is because the LLC has advantages
that the Subchapter S has. In addition, they have less ownership restrictions that the Subchapter S
have. The LLC is easy to manage.
Conclusion
Knowing which business structure the advantageous or disadvantageous can help an
owner to decide which structure can be best for their type of business. Knowing the
disadvantages and the advantages is an aid in deciding.
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References
Films on demand. (n.d). Corporate Business Structures. Retrieved from
http://http://www.apollolibrary.com/Library/err/NewElectronicReserveReadings.aspx
Films on demand. (n.d). Your business structure. Retrieved from
http://http://www.apollolibrary.com/Library/err/NewElectronicReserveReadings.aspx
Parrino, R., Kidwell, D. S., & Bates, T. W. (2012). Fundamentals of corporate finance (2nd ed.).
Hoboken, NJ: Wiley.

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