What’s Your Form of Business?
Shannon E. Thomas
What’s Your Form of Business?
When opening a business, establishing new products or bursting into new markets, you will have choices to make. The choices you decide upon are all determined by the information you collect. The more familiar you are about the options you have, the better your choices will be when you venture into the business market. One of the best investments you can make before jumping into entrepreneurship is to research everything about the market. Whether you are starting from scratch, teaming up with another person, or buying an existing business, the first thing you should analyze is what form of business you will be partaking in. The four most recent forms of business ownership are sole proprietorship, partnership, corporation, and limited liability. This research paper will cover the definition of each form, the advantages, and the disadvantages. When you decide to open your own business and you make the choice to be the only boss, you have just made the decision to have a sole proprietorship form of business. “The sole proprietorship form business is a business that legally has no separate existence from its “owner”; meaning this form of business has but ONE owner, according to Encyclopedia of Small Business (2002). This form of business ownership is the cheapest, most relatively uncomplicated business venture. In our society today, the vast majority of small businesses begin as sole proprietorships. If you choose this ownership, you and the business are one and the same. You can continue operating as a sole proprietor as long as you're the only owner of the business. According to Encyclopedia of Small Business (2002), an advantage of having a sole proprietorship form of ownership is “an owner of this type of business gets to keep all profits derived from the operation”. Another amenity for this form of ownership is “the owner has the authority to make all the decisions relating to the business. Since there are no co-owners, there is no need to hold policy-meeting sessions or form any group similar to a board of directors. The owner must bear the responsibilities that accrue from the decisions made”, this also according to Encyclopedia of Small Business (2002). Where there are advantages, there are disadvantages. According to Entrepreneur.com (2011), as the owner, “you are financially responsible for satisfying all business debts and/or losses suffered by the firm, even to the point of sacrificing your personal or other business interests to pay off any liabilities.” That means if you fail to pay a debt, the creditor can sue you for your business assets, as well as your personal assets. Making unlimited liability the major disadvantage carried by the sole proprietorship form of business ownership. Another drawback for the sole proprietorship is “a owner can lose some lucrative tax-free fringe benefits because they cannot participate in company-funded employee benefit plans like medical insurance and retirement plans”, according to Entrepreneur.com. (2011). A sole proprietorship form of business ownership has great advantages and so pretty harsh drawbacks, however to kind of soften the blows from the disadvantages you could look into other forms of ownership, like the partnership form. Don’t want to personally deal with the short comings of having a sole proprietorship, but still want the simplicity of that form of business, you should try embarking on a partnership form of business ownership. According to Entrepreneur.com (2011), a partnership is defined as “a legal form of business operation between two or more individuals who share management and profits.” The federal government recognizes several types of partnerships. The two most common types of partnership are general and limited partnerships. According to Entrepreneur.com (2011), “in a general partnership, the partners manage the company and assume...
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