FORMS OF BUSINESS

Forms of Business

Forms of Business

Introduction

In this paper it is discussed about different forms of business and for this all types of businesses are discussed in depth so as to make clear concept of different types of business. We have been hired to analyze and recommend an appropriate business form for a manufacturing concern that is currently operating as a sole proprietorship. The business owner wants to minimize the liability of the business. Since the business is about to expand, it requires investment. The owner wants to have the most appropriate form of business, which ensures maximum tax benefit, longevity of the business, decision-making freedom, and the retention of profits.

There are various options available to the owner. They have to choose from General partnership, C-corporation or Limited Liability Company, Limited partnership, Sole proprietorship, S-corporation to have an optimum structure of business.

Sole Proprietorship

In Sole proprietorship the major functions are performed by the sole proprietor; these include responsibilities such as sales manager, finance manager and overall manager. There is no requirement for any formalities or agreements in sole proprietorship, since the proprietor solely owns the business (Jeremy, 2004). It is a single man working as an entrepreneur and the person who is entrepreneur he seeks all the operations managed in the businesses. He his fully responsible for all the acts he does to run the business or small firm. In this type of business the entrepreneur is fully responsible and the liability of his is unlimited it means that he is responsible to pay all the dues withheld from his side.

Liability

In Sole proprietorship, there is an unlimited liability of the owner. This means that an owner is required to pay off the liabilities and debts of the business, even if this means to sell out the personal assets of the owner (Robert, 1997).

Income taxes

The profits of a sole proprietorship are taxed only time because the whole business falls under a single ownership. Income taxes are to be paid by the sole proprietor and there are some panels made for the different type of taxes imposed.

Longevity or continuity of the organization

It is on the discretion of the owner to dissolve the business anytime. However, the Sole proprietorship business ends as the owner dies.

Control

The Sole proprietor have unlimited authority to take all the decisions about the business. However, to some extent the decisions of a Sole proprietor are affected by the external factors such as vendors, etc (Foster, 1960).

Profit retention

The Sole proprietor is the only one to have all the profits for himself.

Location

Although, there are no bindings to expand the business to multiple locations but, there are limited resources available to a Sole proprietor. This is the reason why, the Sole proprietorship is generally confined to a limited number of locations (Robert, 1997).

Convenience or burden

The Sole proprietor has to manage all the functions of the business personally. If the business is complex, which is usually the case, the Sole proprietorship becomes a burden for the ...