Corporate Business Structures
Corporate Business Structures
Mary Cervantes
FIN 571 March 23, 2015
Nicole Landry
Corporate Business Structures
When determining the optimal business structure, several factors must be taking into consideration, such as the location of the business or work performed, any regulatory agencies or rules that apply to the business, and the structure of the ownership. Once those items have ben determined, the overall business structure can be selected to provide the most benefit. There are three basic business structures; sole proprietorship, partnership, and corporations. (Parrino, Kidwell, & Bates, 2012) Each of these structures is advantageous in its own right.
Sole Proprietorship
Sole Proprietorships make up approximately 75% of all businesses in the United States, which can be attributed to many of their advantages. (Parrino, Kidwell, & Bates, 2012) This structure is very simple to start, has minimal regulation compared to a Partnership or Corporation. This structure requires less initial capital to begin, which is also very attractive to small business owners. Many people who choose this structure value their ability to make sole decisions. While this is structure is a simple legal structure that provides numerous benefits, it has its disadvantages as well.
Some of the disadvantages of Sole Proprietorship are the unlimited personal liability and the restrictive nature in terms of growth. This structure is limited to the personal investment of the proprietor, which limits growth and the ability to later transfer the business to a new owner. If and when the business is sold, the price is reduced due to the sell of assets. (Parrino, Kidwell, & Bates, 2012)
Partnership
Partnerships account for approximately 10% of all business in the United States. (Parrino, Kidwell, & Bates, 2012) There are two types of partnerships, general and limited. (Parrino, Kidwell, & Bates, 2012) While a general partnership offers the similar advantages to that of a
Mary Cervantes
FIN 571 March 23, 2015
Nicole Landry
Corporate Business Structures
When determining the optimal business structure, several factors must be taking into consideration, such as the location of the business or work performed, any regulatory agencies or rules that apply to the business, and the structure of the ownership. Once those items have ben determined, the overall business structure can be selected to provide the most benefit. There are three basic business structures; sole proprietorship, partnership, and corporations. (Parrino, Kidwell, & Bates, 2012) Each of these structures is advantageous in its own right.
Sole Proprietorship
Sole Proprietorships make up approximately 75% of all businesses in the United States, which can be attributed to many of their advantages. (Parrino, Kidwell, & Bates, 2012) This structure is very simple to start, has minimal regulation compared to a Partnership or Corporation. This structure requires less initial capital to begin, which is also very attractive to small business owners. Many people who choose this structure value their ability to make sole decisions. While this is structure is a simple legal structure that provides numerous benefits, it has its disadvantages as well.
Some of the disadvantages of Sole Proprietorship are the unlimited personal liability and the restrictive nature in terms of growth. This structure is limited to the personal investment of the proprietor, which limits growth and the ability to later transfer the business to a new owner. If and when the business is sold, the price is reduced due to the sell of assets. (Parrino, Kidwell, & Bates, 2012)
Partnership
Partnerships account for approximately 10% of all business in the United States. (Parrino, Kidwell, & Bates, 2012) There are two types of partnerships, general and limited. (Parrino, Kidwell, & Bates, 2012) While a general partnership offers the similar advantages to that of a
References: Parrino, R., Kidwell, D. S, & Bates, T. W. (2012). Fundamentals of corporate finance (2nd ed). Hoboken, NJ: Wiley.