LAW/521

Topics: Corporation, Limited liability company, Types of business entity Pages: 8 (1556 words) Published: January 2, 2014
University of Phoenix Material

Business Forms Worksheet

There are seven forms of business: sole proprietorship, partnership, limited liability partnership, limited liability company (including the single member LLC), S Corporation, Franchise, and Corporation.

1. Research and provide three advantages and three disadvantages for each business form.

2. Provide a 100- to 200-word summary in which you provide an example business that you would start for each form. What is legally necessary to file in order to form that business? Discuss at least one of the advantages and one of the disadvantages of that form.

Sole Proprietorship

Advantages

1. Low cost of formation

2. One person decides all the business decisions

3. All of the business profits go to the owner

Disadvantages

1. Access to funds are limited to the owner

2. Sole proprietor’s have unlimited liability

3. Sole proprietorship is responsible for torts committed by the business and its employess

Summary:
An example of a business that can be started through a sole proprietorship is a gutter cleaning service. After creating a name which can be the owners name or a D.B.A. in which he would have to register. The owner would have full responsibility to the decisions of starting the business. The owner will have choices on who to hire, fire, and promote. The business will be started through funds obtained from the owner through his personal funds and personal loans. A disadvantage is that the owner will have to fund all the equipment used for the business with thoses funds. An advantage is he would have total choice on which equipment he purchases. Another advantage is that if an opportunity to sell the business occurs the gutter cleaning owner would have the only voice in making that matter. Depending on where the business is located certain licenses may need to be obtained through local governmental agencys.

Partnership

Advantages

1. Shared management responsibility (Right to Participate)

2. Share of profits

3. Right to return of capital upon termination barring any outstanding creditors

Disadvantages

1. Shared exposure to loses

2. General partners have unlimited personal liability

3. A general partner has to disclose business opportunities to other partners before exploring them personally

Summary:
A partnership is created when two or more people enter into an oral, implied, or written agreement to create a for profit business. An example of this is a brother and sister team that purchases real estate together for rehabbing and reselling. In most states they would have to file taxes through personal taxes called flow through taxes. In practice the general partners should create a written agreement as to the rules of the partnership. The agreement is not a requirement but would be to help in case of a dispute. An advantage of a partnership is share in the profits. However that also comes with a share in the liabilities. The partnerships will have unlimited personal liability. For example if the brother gets into a car accident while on business the person that he got into the accident with can sue both the brother and the sister for injury. In a partnership another advantage is that the share of management responsilility of the company.

Limited Liability Partnership

Advantages

1. Tax advantage.

2. Opportunity for shared decision making.

3. Opportunity for unlimited shareholders.

Disadvantages

1. General partners personal assets are unprotected.

2. General partners are liable for each others actions.

3. Extensive documentation requirements.

Summary:

A good business structure for specialized occupations such as an accounting firm or law office would benefit from becoming an limited liability partnership. The business would be able to utilize the expertise and capital of the partners. The general partners will be liable for all business...
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