Business Structure Advice Individual Assignment

Topics: Corporation, Corporate tax, Business law Pages: 4 (542 words) Published: April 7, 2015

Business Structure Advice
Sheila E Torres
March 20, 2015
Professor William Thompson
Business Structure Advice
Dear Mr. Owner,
You are about to make a very big decision and it will be one of the most exciting adventures that you will participate in. In response to your request, there are three business structure options to choose from when starting a business. These structures consist of sole proprietorship, partnership, and corporation. To assist you in selecting the best structure for your business, I would like to discuss the benefits and drawbacks, as well as legal and tax implications of each structure. Sole Proprietorship

A sole proprietorship is owned and operated by a single owner. It is the easiest, most inexpensive, and least regulated structure to organize. The owner receives all the profits and has full business authority (Parrino, Kidwell, & Bates, 2012). On the downside, the sole proprietor is held personally liable for everything; the debt and obligation of the business. Also, the source of capital is restricted to the owner’s personal funds including the loan the owner can acquire. For tax implications, the sole proprietor benefits from flow-through taxation wherein the earnings and losses of the company are filed through the proprietor’s individual tax returns (Cheeseman, 2013). Partnership

A partnership is a structure formed by two or more co-owners. General partnership enjoys the same benefits and drawbacks as a sole proprietorship. The principal advantage of a partnership is that it has more access to funds due to more than one partner funding the operations. The disadvantages are unlimited personal liability and legal responsibility for the action of partners (Cheeseman, 2013). The entity must file an annual information return to report business earnings and losses, but it is not required to pay federal taxes (Partnership, 2014). Corporation

The corporation is the most difficult and expensive structure to...

References: Cheeseman, H. R. (2013). Business law: Legal environment, online commerce, business ethics, and international issues (8th ed.). Upper Saddle, NJ: Prentice Hall
Corporations. (2014). U.S. Small business administration. Retrieved from
Parrino, R., Kidwell, D.S. & Bates, T. W. (2012). Fundamentals of corporate finance (2nd ed.). Hoboken, NJ: Wiley
Partnership. (2014). U.S. Small business administration. Retrieved from
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