Essay on Business Structures

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Business Structures
Jessica Richards
FIN561
December 18, 2014
Glenn Alan
Business Structures
There are many factors to take into account when deciding on what type of business to open. The first step is to look at all of the different types of business structures and determine which best meets the needs and wants of the business and owner. This paper will discuss three different business types; sole proprietorships, partnerships, and corporations; as well as, the advantages and disadvantages of each type. Sole proprietorship the easiest and cheapest business structure to start-up. It is owned and operated by a single person. All of the business decisions and company practices are ran through the owner (Films On Demand Digital Education Video, 2011). Even though this is the easiest form to start-up, there are disadvantages to this form. One such disadvantage is that the owner is held entirely liable for all of the debts of the business (Cheeseman, 2013). When ownership is shared by two or more persons, this type of business structure falls under a partnership business structure. There are two forms of partnerships; general and limited. General partnerships are created when the co-owners have a written agreement. Unless the written agreement specifies a difference, both owners are held equally liable for the debts of the company (U. S. Small Business Association, 2014). Co-owners are protected when they enter into a limited partnership. Their liability is limited to their percent of ownership in the company, or their percent of investment in the company (Cheeseman, 2014). Corporations are more difficult to obtain, but offer the most protection. There are three types of corporations; general, Subchapter S, and limited liability corporations. The most common type of a corporation is the general corporation and allows for an unlimited number of stockholders. It operates as a separate entity from the stockholders giving an added protection against personal liability for debts (Films On Demand Digital Education, 2011). Subchapter S corporations differ from general corporations by how they are taxed. Advantages to this type are how they are taxed and liability. This type is taxed like a sole proprietorship or partnership and owners are protected from being held personally liable for its debts. Similar to the S
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