Legal Structure of Business

Legal Structure of Business

Introduction

The purpose of this study is to expand the boundaries of our knowledge by exploring some relevant and factual information relating to the Legal Structure of Business. There are three legal types of legal structures that allow individual and entities to keep control of their business. They are subject to various forms of incorporation and correspond to different liability regimes (Olmi, 2001). In this paper, we will make a case for a franchisee to utilize one of these structures at the expense of the others. The purpose of this paper is to identify and distinguish between the various business structures.

Discussion

Legal Structure of Business

Once an individual has decided on the type of business, he or she set must determine the legal structure of it. There are three basic types of legal structure of a business (Mancuso, 2004):

sole proprietorship

partnership

corporation

Sole proprietorship

The sole proprietorship is the easiest and least expensive method of individual enterprise. The birth of the individual enterprise often coincides with the will of a worker to start his own business or an entrepreneur to start a small business. In contrast to the formation of a company, the individual firm takes a few formalities and simpler account management. It is when a person starts a business in order to produce the exchange of goods and services, organizing the labor and capital, and assuming the business risk. In the case of sole proprietorship, the holder is fully responsible for the activity and is responsible before the law (legal responsibility). The entrepreneur is the only coordinator and manager of the business. The sole proprietorship can also be seen as a family business (Doherty, 2005).

The constitution and opening a sole proprietorship takes place with the allocation of a VAT number and registration with the commercial register. The requirements and procedures for opening an individual company vary depending on the type of activity (Zahorsky, 2008).

Partnership

Partnership is an organization made up of a collection of individuals or legal entities (members) linked by the pursuit of a common goal. The partnership has a personal basis and consists of at least two people pursuing a common legitimate goal. Following are the basic elements of forming a partnership (Zahorsky, 2008):

Subjective element, consisting of a community of individuals who come together in a more or less continuous manner in order to achieve a particular task.

Teleological element: this is the key element of the association, ...