Starting a Business

Topics: Corporation, Partnership, Business law Pages: 8 (1997 words) Published: February 5, 2015
Starting and Naming a Business

Discussion Board 4 Case Study

Dial S. Johnson

Liberty University

October 10, 2014

Introduction
Betty Wilson is contemplating opening a Christian coffeehouse in North Carolina and as part of this process, she must make several important decisions before starting and naming her business. This paper will address the options confronting Betty by analyzing the various business forms available, selecting partners and assigning roles, determining whether or not to open a franchise, and naming her business. The paper will conclude with applying a Christian worldview to Betty’s situation. Business Forms

Choosing the correct business form is one of the most important decisions a business owner will ever have to make (Fleischman & Bryant, 2000). Betty must select which form of business she would like to operate and should consider some significant factors such as tax responsibility, liability, control, formation, and operation when deciding the appropriate business form to pursue. The following will identify the three major forms of business organizations and include advantages and disadvantages of each. Sole Proprietorship

The sole proprietorship is, “a business owned by one person, who has sole control over management and profits” (Kubasek, Brennan, Browne, 2015, p. 422). It is the most common form of business in the United States (66%) with only 1% of sole proprietorships reporting revenue exceeding $1,000,000 per year (Starting and Naming a Business, n.d., Slide 3). Some of the advantages of this form of business include ease of formation/operation, pride of ownership, no special taxes, and less government regulation at all levels (Kubasek et al., 2015; Starting and Naming a Business, n.d.).

Although there are many advantages to a sole proprietorship, there are also disadvantages. The most significant drawbacks are personal liability for almost all assets, limited financial resources, limited benefits, and the amount of time required for the business to grow (Kubasek et al., 2015; Starting and Naming a Business, n.d). Partnership

The Uniform Partnership Act (1997) defined partnership as, “an association of two or more persons to carry on as co-owners of a business for profit.” Advantages of a partnership include the ease of starting, relatively small initial investment, and the profits of the partnership are taxed only as income to the partners—the partnership itself does not pay taxes (Kubasek et al., 2015). Some of the disadvantages of a partnership include additional liability exposure, sharing profits, disagreements among partners, and terminating the partnership (Starting and Naming a business, n.d., Slide 4). The U.S. Small Business Administration (SBA) identifies the two most common forms of partnerships as general partnerships and limited partnerships.
General partnership
In general partnerships, it is assumed that profits, liability, and management duties are divided equally among partners (SBA, 2014). Any unequal distribution must be documented by the partners in the partner agreement.

Limited partnership
The SBA (2014) defined limited partnerships as partnerships that “allow partners to have limited liability as well as limited input with management decisions.” These limits are dependent on the percentage of investment the partners contribute. Corporation

A corporation is, “an entity formed and authorized by state law to act as a single legal person and to raise capital by issuing stock to investors who are the owners of the corporation” (Kubasek, et al., 2015, p. 438). All corporations are either private (stock is not traded on national exchanges) or public (stock is traded on national exchanges). The advantages of forming a corporation are, “having more money for investment, limited liability, separation of ownership and management, ease of ownership change, a(nd) perpetual life” (Starting and Naming a...
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