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ASSIGNMENT INSTRUCTIONS:
the first step in setting up a new company is choosing among the different types of business ownership. The business structure one chooses influences everything from day-to-day operations to taxes, to how much of one’s personal assets are at risk. One should choose a business structure that gives one the right balance of legal protections and benefits.
What questions should be asked in determining the appropriate forms of business ownership for a business?
What are the advantages or disadvantages of sole proprietorship and partnership forms in an organization? Would you use a sole proprietorship in your business in the future? Why or why not?
What are the different types of partnerships? Why is the partnership agreement important? Would you use a partnership in your business in the future? Why or why not?
Develop a two- to three-page APA-formatted paper
HOW TO WORK ON THIS ASSIGNMENT (EXAMPLE ESSAY / DRAFT)
Introduction: Choosing the appropriate form of business ownership is crucial for any business. The structure of the business affects daily operations, liability, taxes, and management. The following paper outlines questions to be asked when determining the appropriate form of business ownership and compares the advantages and disadvantages of sole proprietorship and partnership forms.
Questions to Consider:
- What is the nature of the business?
- What level of control does the owner wish to have?
- What level of risk is the owner willing to take on?
- What is the level of personal investment in the business?
- How is the business going to be funded?
- What is the expected level of profits?
- What is the level of liability the owner is willing to accept?
- What is the tax implications of the business ownership?
Sole Proprietorship: A sole proprietorship is the most common and straightforward business ownership structure. The owner has complete control over the business and is responsible for all profits and losses. One significant advantage of a sole proprietorship is that it is easy to set up and maintain. However, the owner is personally liable for all debts and obligations of the business. Moreover, the business will end with the death of the owner, which may not be ideal for a long-term business plan. In my future business, I would not choose sole proprietorship as it exposes all of my personal assets to liability.
Partnership: A partnership is a business owned by two or more people. There are several types of partnerships, such as general, limited, and limited liability. The partnership agreement is critical, as it outlines how the business will be run, how profits and losses will be shared, and how disputes will be resolved. One significant advantage of a partnership is that it spreads the risk among the owners, and the business does not end with the death of one partner. However, disagreements between partners can lead to issues, and each partner is still personally liable for the debts and obligations of the business. In my future business, I would consider a partnership if I found a compatible partner who shares my vision and values.
Conclusion: Choosing the appropriate form of business ownership is a critical decision for any entrepreneur. The owner should consider various factors, such as the nature of the business, risk, liability, and tax implications, before deciding on a business structure. Sole proprietorship offers complete control, but it exposes the owner to personal liability. Partnerships offer risk-sharing but require a well-constructed partnership agreement and may lead to disagreements. Ultimately, the owner should choose a business structure that balances legal protections and benefits.
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