Legal_Forms_of_Business

Legal Forms of Business Audrey Tarver LAW 531 May 28, 2012 Bradley Romig Legal Forms of Business Understanding business and the diverse legal forms of business can be complicated. Learning the various forms of business and deciding which forms appropriately applies to the type of business sought is essential to making the most favorable choice. In most cases, business owners must examine state and federal laws, tax laws, and other legal aspects. The legal forms of business; sole proprietorship, partnership, limited liability company, limited liability partnership, S corporation, franchise, and corporate will be examined. Sole Proprietorship Sole proprietorship is straightforward; the owner is the business (Cheeseman, 2010). According to Cheeseman, the business is not an independent legal entity. Sole proprietorship is the preferred form of business for an individual providing services such as catering, landscaping, housecleaning, and document preparation services. The sole proprietorship is the preferred form of business because the owner owns the entire business, receives all of the profits, and if the owner sees fit to do so, ownership can be easily transferred (Cheeseman, 2010). The advantages of sole proprietorship include minimal formal business requirements, no corporate tax payments, and complete control of decisions, sales, and transfer (Cheeseman, 2010). Partnership A partnership is a for profit organization consisting of two or more people; co-owners, carrying on a business, as co-owners, for profit (Cheeseman, 2010). Partnerships can be cost-effective and easy to establish. In most cases, partnerships develop when at least one person has a certain set of skills, or equipment, and another one or more have a sense of business, and maybe start up capitol. Combined, these assets can form into a successful business such as livery services or real estate. Limited Liability Partnership A limited partnership consists of general and limited partners (Cheeseman, 2010). According to Cheeseman, general partners invest capital, manage the business, and are personally accountable for partnership debts. However, limited partners invest capital but do not participate in management and are not personally responsible for partnership debts beyond their capital contributions limited partnership. Accounting firms and law firms are prime examples of limited liability partnerships. For law and accounting firms, this business forms works best because of the tax advantages, flexibility, and liability protection. Limited Liability Company Limited liability companies (LLC) are accountable to state law and not federal law (Cheeseman, 2010). Creating a limited liability company requires adherence to state laws in which the LLC is being structured (Cheeseman). An example of a limited liability company is Chrysler Group LLC. A company such as Chrysler Group LLC can benefit from reducing personal liability, and tax reduction. S Corporation Owners of an S corporation, or small business corporation, avoid being doubled taxed (Cheeseman, 2010). According to Cheeseman, the income or loss of an S corporation flows through the shareholders. S corporations are not liable for corporate taxes and losses can be written off. Examples of S corporations are NutriSystem, and PetMed Express. Franchise According to Cheeseman, a franchise is created when one party; the franchisor, or licensor, allows another party to use the franchisor’s trade name, trademarks, copyrights, commercial symbols, patents, and distribution of goods and services. This party is known as the franchisee or licensee. Franchises are extremely popular in the food industry. McDonald’s, Subway, and Burger King are a few examples of franchises. Other franchises include the UPS Store, Jiffy Lube, and Jackson Hewitt Tax Service. Corporate According to Cheeseman, corporations are the most foremost form of the business organization in the United States. A corporation is a fictional legal body created according to statutory requirements (Cheeseman, 2010). Examples of corporations included EXXON Mobil, IBM, and Microsoft. Corporation owner’s personal assets are safe from creditors and other entities. The only loss may be that what an owner has invested into the corporation. Conclusion The various forms of businesses are intriguing. The decision regarding the type of business form to pursue should not be taken lightly. All laws and regulations should be reviewed carefully to ensure full understanding. The responsibility of business ownership should not be taken lightly. The advantages and disadvantages of each should be carefully considered. References Cheeseman, H.R. (2010). Business law: Legal environment, online commerce, business ethics, and international issues (7th ed.). Upper Saddle River, NJ: Pearson Prentice Hall.