Business Structures



Business Structures

Introduction

In the United States, the most widespread types of business enterprises that are in use are four in number. These four common businesses are the general partnership, sole proprietorship, corporation, and limited liability company (LLC).

Each of the business type has its own advantages and disadvantages in the cost, ease of setup, periodic reporting requirements, complexity, operating complexity, liability protection, and taxation.In addition, some of the business types have their subclasses which have their own pros and cons (Gambardella, & McGahan, 2010). The selection of correct type of business needs a proper harmonizing of the competing reflections.

Discussion

The Sole Proprietorship

The simplest type of business under which an individual can operate a business is the sole proprietorship. This business type is not a legal entity. The sole proprietorship refers to a human being who is the owner of the business and for its debt he is personally accountable. This business can function under the owner name or it can be operated under a made up name.

This made up name is just a name however it does not make a legal entity individual from the owner. Due to its nominal cost, ease of setup, and simplicity, the sole proprietorship is the most accepted type of business.

Advantages

Sole proprietorships have minute continuing formalities.

Sole proprietorship can be achieved easily, instantly, and reasonably by owners.

Unemployment tax is not paid by the sole proprietor owner.

Personal assets and business can be freely mixed by the owners

Disadvantages

In the business, by selling an interest the owners cannot raise capital.

For the business losses, debts, and liabilities, the owners are legally responsible.

The incapacity or death of the owners in the sole proprietorships hardly endures and do not keep hold of value (Briggeman, Towe, & Morehart, 2009).

The Partnership

A business type that is created automatically when, for profit, two or more individuals involve in a business enterprise. The involvement and connection of two or multiple people for continuing as the co-owners of a business for the purpose of profit makes a partnership, whether these people want to make the partnership or not.

In the various types of partnerships, it provides relative simplicity and flexibility, to its multiple owners, of the operation and organization. A partnership can also offer an extent of liability protection in the limited liability and limited partnerships.

Advantages

Partnerships can be started inexpensively and easily by the owners.

Partnerships need only few continuing formalities and no annual meetings.

To smaller businesses favorable taxation is offered ...