March 11, 2013
Legal Forms of Business
There are numerous forms of businesses. The forms of businesses include Sole Proprietorship, Partnerships, Limited Liability, S Corporations, Franchises, and Corporations. This paper will develop scenarios in which each of these forms of business would be the preferred form, identify the pass through entity, and justify why the corresponding business form is preferred. Sole Proprietorship
A Sole Proprietorship is a pass through entity a single person owns his or her own company, there is no separation between the owner and the company, and it is unincorporated ("Business Entites", 2009). A Sole Proprietor receives all income, pays all debts, and assumes all liability. A Sole Proprietorship best suited a single owner where product liability and taxes are not a concern. An example of a sole proprietorship is a small town gas station or mechanic business. Partnership
A Partnership is also a pass through entity. It is similar to a Sole Proprietorship. The main difference is there are two or more owners or partners of the business. An additional difference is one partner can be liable for any wrongful act or debt of the other partner. This type of company is also like the Sole Proprietorships, in that it is best suited for companies where taxes and debt are not a concern. Many law firms form partnerships. Limited Liability
A Limited Liability Corporation (LLC) is relatively new form of corporate structure ("Business Entities", 2009).. “The LLC features pass-through taxation of the partnership, and limited liability of the corporation” ("Business Entities", 2009). The LLC is considered is own entity. Unlike the Sole Proprietorship and Partnership, the corporation’s partners or shareholders are shielded from taxes, debt, and bad acts that may be responsibility of by the organization. This limits any damage that any individual may incur. Choosing an...