Finance for Managers

Business Structures In the united State, there are a variety of business and organizational structures that are currently operating. Each structure possesses number of advantages and disadvantages that must be considered, whether in a sole proprietorship or corporation. The purpose of this short essay is to identify several types of business structures and list the pros and cons of each. Sole Proprietorship is a company owned and sometimes operated by a single individual.

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These company types can angel from small “mom and pop” retail stores to inventors seeking to sell their products online. The pros of this business structure are that as the owner you have independence, control and overall freedom to decide the direction of your organization. Also, It Is fairly easy to establish a sole proprietorship, and the process of running them Is relatively simple. However, shares or Interests cannot be sold In this business structure to generate cash flow, and the owner Is solely liable for all of the debts and legal suits of the business.

Your Business Structure, 2011) Partnerships are very similar to sole proprietorship, except more than one person is involved. Two or more people come together to work at a given business and share in the profits (or losses) or that business. Like sole proprietorship, a partnership is relatively easy to set up and doesn’t have to pay the sort of taxes that larger corporations do. However, the partners themselves are responsible for business losses and liabilities, and partnerships founded on informal agreements may run onto interpersonal problems when the company struggles. Your Business Structure, 2011) Corporations are companies that are controlled by a group of people who own shares In the company. The shareholders dictate who runs the company and how It conducts business and receives profits based on the shares of stock that they own. Corporations can raise funds more easily and readily than partnerships and sole proprietorships and often have access to more starting capital. Corporations are more complex than other business structures because they tend to have costly administrative fees and complex tax and legal requirements. Corporate Business Structure, 2011) S Corporations, like partnerships do not pay any federal income taxes. Instead, the business’s profits and losses are passed through to the shareholders, who must then report the income and losses on their personal tax returns. Pros consist of the elimination of double taxation, protection from liability and the ability to have up to 100 owners. Cons include tax qualification obligations, stock ownership restrictions and less flexibility In allocating income and loss.

Corporate Business Structure, 2011) Limited Allowably Companies or LLC, flirts arose In 1977, making them a comparatively recent phenomenon. LLC combine the elements of a corporation with those of a partnership or solely owned business. Like liabilities. Like partnerships and sole proprietorships, they are comparatively simple and allow for quick operation. Because they are comparatively new, fewer legal precedents control their actions, which may create unanticipated problems in their operation. Corporate Business Structure, 2011) There are a six basic business trustees prevalent in the United States. When establishes a business it is important to have a comprehensive understanding of the potential legal and tax implications. This information can be obtained from a variety of sources and is readily available for any US citizen interested in starting a business. References (2011). “Corporate Business Structure”. University Library http://digital. Films. Com/ ). Your Business Structure”. University Library. Http://digital. Films. Com/proportionality. Asps?