...Business Structures: Advantages and Disadvantages FIN/571 09/23/13 Kenneth Baker Introduction Starting a business can be challenging for individuals. That individual will have to decide which business structure will be right for their business and develop a solid business plan from that structure. There are many business structures available to new business owners, there is sole proprietorship, partnership, limited liability company and corporation. This paper will identify each structure and list the advantages and disadvantages of each structure. Sole Proprietorship Sole proprietorship has no other owners to divide profits with, which allows a sole proprietor to use company funds in any way the individual see fit. Sole proprietorships are easier to set up out of the other structures and is easy to separate. Some advantages are no business registration is not required, there is no requirement to file formation documents like the person would if their business structure were LLC. Sole proprietorship has easier bookkeeping. The owner and business are one and the same so it is like balancing your checkbook. Any profits are taxed at the owners individual federal tax rate so that person does not have to file a separate business tax. The disadvantages would be the lack of liability protection for the business owner. This means the owner would have to take personal responsibility to pay every business debt and obligation and their personal assets are not protected because...
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...Business Structure FIN 571 Professor Charles Marchand August 25, 2014 Each business structure has it advantages and disadvantages, however each one structure may or may not be advantageous. An advantageous structure is a structure that is beneficial and has favorable circumstances. In choosing business structure, one must choose the structure that best fits their business plans. There are three types of business structure, which consists of partnership, sole proprietorship, and corporation. A corporation is considered to be a standalone entity. In a standalone entity, no one person is liable for the assets or debts of the company, and separates tax liabilities. Another beneficial advantage is since the corporation is its own entity the corporation does not end once the owner is no longer there but continues on through shareholder. A disadvantage of corporations is corporations have to pay taxes twice which occurs during when the corporation turns a profit and pays dividend to shareholders. A sole proprietorship is the most inexpensive way to start a business. Within this structure, the owner has complete control over operations and responsible for business decision-making. Far as taxes, no specific business taxes are paid, but the owner pays taxes on the income of the business as part of their personal taxes. The major disadvantage of sole proprietorship is the business owner is personally responsible for all obligations and debts of the business. If the business...
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...Business Structures Robin Duuring FIN/571 July 28, 2014 Zhenhu Jin Business Structures There are several business structures to consider when looking at starting a business. Each of structures has advantages and disadvantages. By doing, in-depth research on each structure will allow for the best decision on a business structure. A careful consideration of the organizational structures: Sole proprietorship, Partnership, Corporation, S Corporation and Limited liability company (LLC) are advantageous in helping a business to succeed. Sole Proprietorship Sole proprietorship is the most common business structure. This type of structure is owned and operated by one proprietor. An advantage is that sole proprietorship is a simpler and inexpensive structure to start compared to other business structures. This type of structure is considered a "pass-through" tax entity, where all of the revenues and costs pass through the business to the proprietors, who report their portion of the revenues (or deduct their portion of the costs) on their individual income tax returns (Gaff & Fryzel, 2012). Some more advantages of a sole proprietorship are independence, autonomy, one-decision-maker and an effective management structure ("Sole Proprietorship," 2007). A disadvantage of sole proprietorship is a business and proprietor is one and the same with unlimited personal liability (Gaff & Fryzel, 2012). All pressure of successes and failures is the responsibility of the proprietor. Another...
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...Business Structures Fin/571 Business Structures This week we learned about the different business structures to consider when establishing a business. It is important to note the advantages and disadvantages of each business structure when planning a business. The main business structures include sole proprietorship, partnership, and corporation. Sole Proprietorship Sole proprietorship is a business owned by one person. It is the easiest, least expensive, and least regulated business structure to start. The advantage of a sole proprietor include not having to share the profits or control of business decisions with anyone else. However, the disadvantage is that sole proprietors have unlimited personal liability for the business debts and obligations. Partnership. A partnership business agreement legally formed with two or more owners. The agreement specifies the amount of capital each partner contributes, division of profits, the role of each partner, decision-making process, and transfer of ownership in specified events. The advantage of more than one owner is an increase in capital or borrowing capacity, added knowledge and skills from each of the partners. There are two types of partnerships general and limited. General Partnership-a disadvantage is unlimited liability of all the general partners, partners who manage the daily activities of the business, regardless of the amount of capital each contributed. Limited Partnership- partners, who are not...
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...Business Structure Business Structure Being your own boss or in other words owning your own business can have its advantages as well as its disadvantages. As an entrepreneur you are able to take control and direct the culture of your organization and determine what key factors will make your business successful and outdo the competition. The flexibility that you can establish is beneficial to being able to balance your work and personal life with family and friends; all while you are challenging yourself by the new opportunities that will constantly be presented and the creativity that goes along with it. More importantly establishing what type of business is the most important; sole proprietorship, partnership and or a corporation. A sole proprietorship, often being identified as one-person operation, is the most common business structure throughout the world. With a sole proprietorship you have complete control of your organization, making all decisions from your target market, employees, location, and so on. It is simple and easy to establish this type of business structure and the start-up cost are low as well. There are several disadvantage of this type of business structure. Personal liability is a major disadvantage because it is not separate from our business; meaning creditors can sue you directly. Another issue is the ability to raise money to start your business. Most lenders are fearful to financing sole proprietors simple because if the business fails no money...
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...Business Structures FIN 571 July 20, 2015 Business Structures When forming a business, there are three basic structures to identify and understand. Sole proprietorship, partnership, and corporation comprise the basic structures. The partnership can be a general partnership or a limited liability partnership and the corporation can be three types: general, subchapter S (S corporation), and limited liability company (LLC). For a business venture, there are many questions to contemplate to help in the decision for the type of structure. Is control of all aspects of the business important? Are loans or investors necessary? How important are tax credits or savings? What amount of capital is available? How much personal risk is an option? A summary of the advantages and disadvantages of each business structure provides an understanding of the importance of these questions. Starting a business can be expensive unless the choice is a sole proprietorship with “only minimal fees to obtain a business name and certificate” (Your Business Structure). Usually there is no need for an attorney or accountant in addition to not paying corporate taxes. In a sole proprietorship, the owner can claim the business on the personal income. The other main advantage to entrepreneurs is the “sole” ownership of the business. Having control of all decisions, profits, and operations of a business that is easy and inexpensive to establish is an attractive option. Unfortunately, sole...
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...Business Structures One of the first steps before starting business should be choosing the proper business structure of the company as each type of business structure will have its own legal and tax implications. The types of business structures include sole proprietorship, partnership and corporation. Sole Proprietorship A sole proprietorship is the most common type of business in United States. This type of business typically consisting of the proprietor and a handful of employees. In Sole Proprietorship business type, the owner of the business is entitled to all profits and handles all your business’s debts, losses and liabilities. The advantages of Sole Proprietorship include complete control of the business, Ease and inexpensive to forming the business and easy tax preparation as Sole Proprietorship is not taxed separately. Disadvantages for this type of business include unlimited personal liability, hard to raise capital and heavy burden as you handle success or failure of the company. Partnership A partnership consists of two or more owners who have joined legally to manage a business. Partners of the business contribute to all aspects of the business, including decision making and raising money for the business. To form a partnership business, all owners enter into an agreement with all the roles and responsibilities of each owner. They also agree on how profits are shared and how ownership will be transferred in case of specified events, such as the retirement...
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...type of business structure to partake on, one has many options to consider when deciding to start a new business venture. The business structures that has to be identified and determined which is suitable for the individual or individuals are the Sole Proprietorship, Partnership and the Corporate structure and also the Sub Chapter S Corp and the Limited Liability business structure. Each of these structures have particular advantages and disadvantages that are associated with them, that needs to be addressed and identified. The Sole Proprietorship structure is a individually owned and managed. This business structure is the least regulated out of the different structures and the costly to form. The owner of this business structure bhas complete control and have a simplified tax structure to adhere to. A major disadvantage of the Sole proprietorship business structure is that income is reported as individual income .Also another disadvantage with Sole proprietorship business structures are that the owners amount of personal liability for the business, and that banks are more reluctant in providing loans for this type of business structure because of a perception that the business will have the ability to repay the loan if the business fails. Because of the inability of this business structure to issue or sale stock, investors are often hesitant to invest in this business form (U.S. Small Business Administratio ,2013). The Partnership business structure consist...
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...advising, what type of business structure to partake on, one has many options to consider when deciding to start a new business venture. The business structures that has to be identified and determined which is suitable for the individual or individuals are the Sole Proprietorship, Partnership and the Corporate structure and also the Sub Chapter S Corp and the Limited Liability business structure. Each of these structures have particular advantages and disadvantages that are associated with them, that needs to be addressed and identified The Sole Proprietorship structure is an individually owned and managed. This business structure is the least regulated out of the different structures and the costly to form. The owner of this business structure has complete control and has a simplified tax structure to adhere to. A major disadvantage of the Sole proprietorship business structure is that income is reported as individual income .Also another disadvantage with Sole proprietorship business structures are that the owners amount of personal liability for the business, and that banks are more reluctant in providing loans for this type of business structure because of a perception that the business will have the ability to repay the loan if the business fails. Because of the inability of this business structure to issue or sale stock, investors are often hesitant to invest in this business form (U.S. Small Business Administration , 2014). The Partnership business structure consists of two...
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...Business Structures The purpose of this paper is to identify the different business structures and explain the advantages and disadvantages of each. Each business structure has their own legal and tax implications. It is important to understand the variances of each structure to operate a business. The different structures are the following: general corporation, S corporation, limited liability corporation, sole proprietorship, and partnership. Corporation Corporations are the most complex business structures. There are three types; general corporations, s. corporations, and limited liability corporations. “Corporations are a separate legal entity owned by stockholders” (Films Media Group, 2011). The advantages of corporations are the limited liability, the advantage to produce capital, and corporate tax rates. S corporations are usually better for small businesses that want the tax savings, but they have a stricter operational process. An LLC is not a corporation but has some of the same advantages of an S corporation with fewer restrictions. LLCs are becoming more popular because they are easier to obtain. A famous disadvantage of corporations is double taxation; which occurs when the corporation shows profits and when shareholders are paid. Corporations are also costly and highly regulated. Sole Proprietorship Sole proprietorships can be an economical way to start a business. This is business structure that owners prefer when they want absolute authority. An immense...
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...Business Structures Ted Harris FIN/571 - Corporate Finance March 5, 2015 Robert Trujillo Business Structures Starting a business comes with many of important decisions. One of the first and most important decisions is how the owner will structure their business. The structure depends on if the business will have partners or employees, amount of control over the business, the amount of liability the business owner wants to take on, as well as other factors. Each business structure along with their advantages and disadvantages will be discussed below. The first business structure is a Sole Proprietorship. This business structure is owned by one person, and 75 percent of all businesses in the United States are of this structure (Wiley, Kidwell, & Bates, 2012, pg 6). Sole Proprietorship’s are an easy and inexpensive way to start a business. Business owners choosing this structure generally have limited funds and want absolute authority of business affairs. One major disadvantage is that there is no separation between business and personal affairs. The business owner also has unlimited liability Partnerships are another form of business structures where two or more people have joined together to run a business (Wiley, Kidwell, & Bates, 2012, pg 7). There are two different types of partnerships: a general partnership and a limited partnership. Like a sole proprietorship, the general partnership has the same advantages and disadvantages. Each partner has unlimited...
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...Business Structure Belinda Sintim FIN 571 March 14, 2016 David Johnson Business Structure When one decides or proposes to start a business, they must decide on the type of business structure that would best benefit the needs of their business. Each business structure has its advantages and disadvantages. The three different business structures are Sole Proprietorship, Partnership and Corporation. Each structure has different set of rules and regulations that the owner or owners have to abide by. The Sole Proprietorship has the least amount of regulations from federal state or local government that owners would have to follow (Carter, 2016). This form of business structure has one owner. It is considerably the easiest structure to partake in, because there are not any documents needed to legally start Sole Proprietorship. Many people favor the fact that this structure gives the owner a great deal of control over the business. The biggest disadvantage is the fact that the Sole Proprietorship does not have any protection for the business owner in liability of the company’s debts and obligations. Which means that the owner’s personal assets are not protected when the company is liable for any type charges or debt. (Carter, 2016) A Partnership is structured with two or more people who own the business. Unlike the Sole Proprietorship the Partnership allows the burden or the responsibility to be shared among all the owners not just one. Just as sharing the duties...
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...Report based on case study “ A successful business development”. Contents: 1. Types of business entity 2.1. Explanation of each entity 2.2. Advantages and disadvantages of each type of entity 2.3. Objectives of each entity 2. Stakeholders 3.4. Definition of stakeholder 3.5. List of stakeholders of each entity 3.6. Interest of each stakeholders 3. Organizational structure 4.7. Comparison of two structures presented in the case study 4. Human Resource Management 5.8. The role of HR within the structures presented in case study 5.9. Different methods of HR functions has been delivered of each type of entity 5. Reference 1. Types of business entity In the attached case study we have examples of following business entity: * Section 1: Sole trader * Section 2: Partnership * Section 3: Company: Private Limited Company * Section 4: Public Limited Company Sole trader: Sole trader is an individual who is run his own business. It is a self-employed person who bears risks and losses and takes the profits and the benefits. Partnership: Partnership is type of entity which is organized and managed by at least two people and where all profits and debts are share between the partners. Private limited Company: Private limited is type of business entity which is run and managed by shareholders who has limited liability and shares are exchange privately. There are restrictions define...
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...Business Structure Advice Rebecca Hardy FIN/571 - Corporate Finance 22 September, 2014 Professor Gurpreet Atwal Dear John Owner, Thank you for allowing my consulting firm to give you the information that you will need to make a sound decision as to the type of business structure that will meet your needs. The three main types of business structure are sole proprietorship, partnership, and corporation. In the next few sections I will explain each type and describe the advantages, disadvantages and tax implications that you would encounter if you selected that type. Let’s begin with the sole proprietorship. Sole Proprietorship The sole proprietorship is the easiest and most cost effective type of business structure to set up, so if funding is a concerned this business structure may be the best route to take. The only cost associated with starting a sole proprietorship the cost of obtaining a business license and the normal startup expenses. With the sole proprietorship the owner is only taxed once on the business’s income. However, one of the major disadvantages of the sole proprietorship is the unlimited personal liability that the sole proprietor faces. In the event that the business cannot generate enough cash flow to pay all of its financial obligations the owner becomes personally liable for all debts. This means that creditors can file lawsuits against the owner’s personal property as well as the business in order to seek repayment for services, loans...
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...Determining the business structure that best suits the needs of the business owner is a vital step. The type of business structure that a person employs may help to create a solid company, or may lead towards failure. To determine what type of business structure is needed, the potential entrepreneur must look at types of business structures available and decide on which one best suits the company. There are three basic types of businesses; sole proprietorship, partnership, and a corporation. Each offers its own advantages and disadvantages as seen in the table below. The first basic business structure is the sole proprietorship. "A sole proprietorship is a business owned by one person." (Parrino, Kidwell, & Bates, 2012, p. 6) This type of business structure is the largest type in the United States. This type of business structure offers several advantages including simplicity in startup, the proprietor keeps all the profits and has sole decision making authority, and sole proprietorships have lower income taxes versus corporations. However, there are disadvantages as well including sole responsibility for paying the bills and unlimited liability for all debts and obligations of the business. Additionally, the owner's personal wealth will limit the amount of equity capital that may be invested. The last major disadvantage is that transfer of ownership can be difficult as there is not stock or interest to sell. The second basic business structure is a partnership...
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