Business Structures
FIN/571 Corporate Finance
May 12, 2014

Business Structures Business structures are used depending on the type of business that is being formed. According to the Small Business Administration, there are six types of business structures that are based on the needs of the business that if being formed. The six types of business structures are Sole Proprietorship, Partnership, Cooperative, Limited Liability Company (LLC), S Corporation, and Corporation. Each business structure offers both positive and negative aspects that must be weighed by the business owner to find the best fit.
A sole proprietorship offers the easiest form of business structure. There is only one owner that is entitled to all profits made by the organization. On the down side, there is little distinction between the business and the owner. The owner of a sole proprietorship may receive all profits from the business but is also personally responsible for all debts that go along with the company.
Partnerships offer business owners a way to split the liability that goes along with owning and operating a business. However, a negative aspect of this would be the requirement to share a predetermined percentage of the profits that are made by the business. There is also the chance of having disagreements when it comes to business decisions because there are multiple parties involved in the organization.
Cooperatives are formed based on the needs of the business members. Profits are distributed to the owners who are also the users of the services that are being provided. The work that goes into the business is divided between the members. The downside of this can be the potential of lesser numbers of people wanting to contribute because their investments would depend on how often they would be using the services that are being provided.
A limited liability company, or LLC,