Business_Forms

Business Forms Celeste Macklin University of Phoenix LAW 531 Craige Harrison January 19, 2012 In considering forms of business such as sole proprietorship, partnership, limited liability partnership, Limited Liability Company, S corporation, franchise, and corporate form, the scenarios of each form of business is listed below. In addition, the scenarios will enable individuals to further understand the relevance of the business forms. Sole proprietorship is owned and operated by one person. This type of business form is easy to form. Many individuals that form this type of business is also called an entrepreneur. The owner of a sole proprietorship has unlimited liability. The scenario for this form of business is a person that decides to open a wedding planning firm. This firm can easily be started and, the owner has full control over the business. Little or no capital is needed to complete this business; however what are needed is clientele and a website. The sole proprietorship is best for this form of business. A partnership is where individual investors or friends may enter ship agreement to open or construct a business. The individuals within the partnership agree by signing the agreement that is registered to continue to contribute capital, knowledge and skills as well as share in the profits of the company. The business will have more than one sole owner which will enable the organization or business to obtain investor support and, individuals that are qualified. The scenario for this form of business venture includes three college friends that always wanted to see themselves as business owners. They decide to open up a Gentleman’s Spa. Gentleman spas specialize in men receiving fresh shaves, haircuts, shoe shines, tailoring, manicures etc. Each person within this business is responsible; the skills of others within the business compliment those skills of the other partners. One example of this is there one partner that has barbering skills, opposed to the partner that has a master’s degree in business and accounting and one individual that has the experience in the tailoring needs of the business. As this unfolds the company becomes more apt and the business is one that will continue to move upward. Limited liability partnership includes having more limited partners. However, the liability is limited to the debts that accrue over time within the firm ("Nolo", 2012). The limited partners within the business receive a return on his or her investments within the company. Partnerships such as these are often formed to attract investors as the liability is limited. Unlike those of the general partnership who concentrate more on the business rather than investing. In addition, partners may leave the partnership without further dissolving the partnership (Chessman, 2010). The scenario for this business form is having two individual engineers that have the ability to produce high nuclear windmills for a nuclear company. Both individuals have the experience as well as the business venture to continue, however they lack the significant amount of capital to start this business. Taking on more limited partners will ensure that the capital needed to start the business will be raised. Forming a limited partnership will enable the partners to attract investors to gain the capital needed to enhance the business. The limited liability company (LLC) allows for limited liability to the owners ("Nolo", 2012). Although a limited liability company may have some of the same characteristics as that of a partnership some of the advantages are no double income tax or a pass through income tax (Chessman, 2010). This form of business has the ability to become taxed as a sole proprietorship or partnership. The business form may be set up by a sole proprietor and they always remain in control of the business. The scenario for this form of business is perhaps one person may want to set up a Paper Max store that specializes in all paper products and, sells the paper products to a factory that produces direct mail pieces. However, the risk is higher because at any time the factory that Paper Max is selling to may have picked up a better buyer and refuses to continue to purchase those same paper products from paper Max. Therefore, the owner of the business decides to make the company a limited liability company the owner receives a pass through taxation to reduce the risk associated with the business. .  The S-Corporation is a form of business that is normally a valid corporation. An S-Corporation will not pay federal income tax, the losses are divided between the shareholders, has limited liability, costly and, the owners all have to be US Citizens ("Irs.gov", 2012). . However, the S-Corporation provides a form of protection from liability and, there can be any number of shareholders. The scenario: You have a mail machine that supplies you with an advantage among your competitors in dealing with direct mail as well as advertising and marketing. You want to set this mail machine up in 10 plants around in different states. We have 22 investors that seem to think that this project could reap a significant amount of benefits and they are willing to invest to give the corporation leverage to maintain and reap the rewards. This business form will enable the owner to have shareholders with limited liability and allows a pass through on taxes. Franchising is the use of a business for the services needed. However, there is a fee associated with franchising. Businesses are often interested in franchising because of the brand recognition as well as the advertising support (Chessman, 2010). The franchisor will often use this business form because they are on a fixed income and the business responsibility is limited. Scenario: Gill knows pizza his pizza has more than just cheese or the sauce, but Gill offers unique toppings such as fresh tuna, shrimp and a special cheese. The owner wants to expand his business, but opening his own store is not an option due to the investments that are needed. Therefore if the owner uses franchising he will have the exclusive rights to the territory, and he would have proven the idea of making pizza his way. Gill would also have a brand name for his pizza. Developing a franchise will enable the company to grow very rapidly. The C-Corporation is a form of business that is taxed separately. Double taxation; one for the owner and one for the business form. Filing documents required at the state and local levels in addition to receiving the certificate on Incorporation ("Irs.gov", 2012). This form of business is governed by the certificate of incorporation or the articles within incorporation. In addition, this form of business is attracted to investors, provide capital incentives to the employees as well as providing management with an operational structure overall. The shares are also transferrable. The scenario for this type of business form is if someone or a group of individuals decide to set up a business that needs capital to sustain the future of the company. Companies such as Adobe, General Electric or Microsoft are considered to be C corporations. Company’s such as these are publicly traded and there are no limits to the number of shareholders. References Chessman, H. (2010). Business Law: Legal Environment, Online Commerce, Business Ethics, and International Issues. : Prentice Hall. IRS.Gov. (2012). Retrieved from http:// http://www.irs.gov/businesses/small/article/0,,id=98263,00.html Nolo. (2012). Retrieved from http://www.nolo.com/legal-encyclopedia/limited-partnerships-limited-liability-partnerships-29748.html