Small Business Idea: From Sole Proprietorship to Corporation
One of the most important business choices one can make is the decision to become an entrepreneur and invest the necessary time, money, and energy into starting a business. Once the owner determines the nature of the business, he must determine which form of business to establish. Factors one must evaluate include legal, tax, and accounting implications and the ease and cost of starting the business (Cheeseman, 2010). Business forms to consider include:
1. Sole proprietorship
3. Limited liability company
In this paper the writer will discuss business organization options for a hair stylist transitioning from employee to entrepreneur.
Unless the stylist actively chooses a specific form of business, his new organization is by default a sole proprietorship or partnership (Daily, 2011). The advantage of sole proprietorship is ease in establishment and ongoing maintenance as the owner manages operations without the need to consult others. In addition, the solitary owner retains all profits. However, the key disadvantage is that the owner has unlimited liability for all business debts and even personal property is at risk if needed to satisfy creditors or legal rulings (Cheeseman, 2010).
An example of a sole proprietorship would be if the hair stylist decides to rent a booth in a salon, with his only obligation being to pay for the right to use the assigned salon space. He has full decision-making rights regarding his clients and business operations and retains all profits. The transition from employee to entrepreneur is easy and quick, so income is not compromised. Liability is low in the hair styling business, reducing the need to establish a more formalized, legal form of business that would provide more legal protection. The stylist is not obligated to pursue special... [continues]
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