FIN/571 Business Structure Advice

Topics: Corporation, Limited liability company, Types of companies Pages: 3 (817 words) Published: December 9, 2013


Business Structure Advice

FIN/571
December 12, 2013

Business Structure Advice
From: Beverly Mahone Sent: December 2, 2012
To: John Owner
CC:
Subject: Advice in starting your business

John, when starting a business one has several options in the type of business structure to use. The different types of business structures are the sole proprietorship structure, the partnership structure, the corporation structure, the S corporation structure, and the limited liability company structure. Each structure has advantages and disadvantages and possible tax consequences. The sole proprietorship structure is individually owned and operated. The sole proprietorship structure is the least regulated and is the easiest type of business to start. The advantages of the sole proprietorship structure are easy and inexpensive to form, complete control, and easy tax preparation. The disadvantages of the sole proprietorship structure are unlimited personal liability and banks are hesitant to lend to a sole proprietorship because of a perceived lack of credibility concerning repayment if the business fails, and because you cannot sell stock in the business investors will not often invest (U.S. Small Business Administration, 2013). For tax purposes income is reported as individual income. In a partnership structure the ownership and operation of the business is between several people. The individual own and share the profits in a partnership. The advantages of a partnership structure are that the partners share in the business. Each partner contributes to every aspect of the business, including money, property, labor or skills, and each partner shares in the profit and losses of the business (U.S. Small Business Administration, 2013). The disadvantages are joint and individual liability, disagreements among partners, and shared profits. For tax purposes a partnership must file an annual information return to report income, deductions, gains,...
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