Entrepreneurship is a means towards financial freedom for many Americans. These individuals would rather work for themselves than someone else, yet developing a business takes much research and dedication. Shania Jackson has an exciting adventure ahead of her in her pursuit of opening a Christian coffeehouse, and she is in a great location for establishing a profitable business. However, Shania is faced with the tough decision as to how to structure her business. There are many business model entity choices that Shania can consider: sole proprietorship, general partnership, limited liability company, and corporation are just a few.
A sole proprietorship is probably the easiest form to be establish and least complicated to maintain. If Shania chooses to set up her business as a sole proprietorship, she will maintain control of all aspects of her business and will be able to let her creative ideas flow freely. According to www.sbdcfortlewis.org, the proprietor is solely responsible for the liabilities and debts incurred by the business; meaning that Shania would not be protected from personal financial ruin or lawsuit (p. 12). The amount of risk Shania is willing to assume should help guide her decision on whether or not to establish sole proprietorship.
When an individual is uncomfortable with risk, they often consider partnership as an alternative. According to Hopson and Hopson (2014), a general partnership may exist if a business owner has shared profits with another (p.43). While profits are shared between the partners in a general partnership, the partners are also liable financially for the business debts (Blair and Marcum, 2015, p.251). For Shania, a general partnership would reduce risk and profit, but it would also reduce her flexibility in setting the overall business strategy.
“The most important consideration owners of new ventures often