Legal_Forms_of_Business

Business comes in many different forms. It comes as a sole proprietorship, partnership, limited liability partnership, limited liability company, S corporation, a franchise, and corporate form. Each form of businesses has its advantages and disadvantages. It’s up to the entrepreneur to choose which type of business he wants to run. Here are some examples of what each form of business would be used at. As its name implies, this form of business is an option only for a business with one owner. Health insurance premiums paid by proprietors and other self-employed people are fully deductible. Another advantage is that a sole proprietorship can be switched to a different structure if future tax reform alters your tax advantage. The low cost is very unique in sole proprietorships. A profession where sole proprietorship would be used would be Internet retail. One individual can operate an Internet retail job. The one employee would be obligated to fulfill orders, manage, and provide the service. The World Wide Web can handle anything else automatically such as order tracking and inventory. A business partnership is when two owners run a business. Both owners have a hand in running the operation. The only problem with this is that both owners are held liable for the business debts. A creditor can sue either owner over unpaid debt. A profession where a business partnership can be used would be a daycare. Two people can co-own a daycare. This would be good with a person who has a business background and a person who has a daycare background. The business would thrive with one person over seeing the day-to-day operations and the other monitoring the revenue. A limited liability partnership is when some partners have less financial liability than other partners in the business. It reminds me of shareholders to a corporation. Although the financial liability is limited, each partner has the right to run the business as he or she fits. A profession where a limited liability partnership could probably be used is a when you open up an insurance company. Because you will probably dish out more insurance money than you can make the first 5 years, LLP would be very useful so that you don’t go into debt. “A Limited Liability Company (LLC) is a business structure allowed by state statute. LLCs are popular because, similar to a corporation, owners have limited personal liability for the debts and actions of the LLC” (Limited liability company). Owners of a limited liability company are called members. An advantage of a LLC is that “members get limited liability and pay similar taxes to a partnership. A profession where a LLC would be started at is a construction business. With construction comes a lot of possible litigation and the company needs to be as far away from liability as possible when it comes to litigation. The less liable the better for business. An S Corporation is which 5 or fewer people own at least half the stock. It enjoys legal rights of a corporation but is taxed like a partnership. An S Corporation also receives major tax cuts! A profession that would be categorized as an S Corporation would be a non-profit organization. Non-profit organizations don’t usually bring in a whole lot of revenue so the tax cuts they receive benefit the company by cutting the amount they have to pay. A franchise is basically when a person chooses to use another company’s business model. It’s an advantage to use a brand name when you franchise a good company. Depending on the company you franchise you may have to spend less in marketing expenses because the company is already well known. Relationships with customers have already been made depending on how popular the company is. An example of a franchise would be McDonalds. Someone would pay McDonalds x amount of dollars to open up a restaurant. They would run the restaurant there way but under McDonalds name. They would also abide by McDonalds mission statement and culture. “Corporations act as separate legal entities from the owners of a business”(Carter). One of the main benefits of a corporation is the lack of liability put on shareholders. Shareholders have limited liability from loss of business and debts. An example of a corporation would be Nestle. Nestle Co is one of the leading food manufactures in the United States. They manufacture candy, pet care products, drinks, etc. Corporations also have unlimited life. Long after the shareholders, presidents, CEO’s, and anyone associated with the company dies the corporation will still be around. In all, each form of business is profitable. Some are harder to start than others. Some require more time than others. But in the end, its all worth it. The profit gained, the partnerships formed, and the experience is why you start your own business. References Carter, C. Advantages of corporate form. DOI: http://www.ehow.com/list_7237486_advantages-corporate-form-business.html Limited liability company. DOI: http://www.irs.gov/businesses/small/article/0,,id=98277,00.html