Final Paper: Legal Forms of Business Samantha Simpfenderfer Cazenovia College When developing and establishing a business, a business owner must first consider what type of legal business that they would like to create and own. In the United States, businesses that vary in form are recognized and represented in court in varying ways. In some forms of business, the personal assets of the business owner are not protected, where in others, a business owner could never risk losing assets outside of their businesses. Of the various forms of businesses that can exist, five of the most popular forms are sole proprietorships, franchises, partnerships, limited liability companies, and corporations. Different businesses all around the …show more content…
When one person owns, operates, and manages a business, they get to make all of the leadership decisions as they see fit, and for some, being their own boss, without having anyone to answer to is the only way that they can be successful. In addition to a variety of advantages, there are also an assortment of downfalls associated with owning a sole proprietorship. First and foremost, the legal structure of “a sole proprietorship provides no protection for the founder against creditors of the business” (Harroch). This means that the business owner can easily be sued with absolutely no legal protection. One legal issue can potentially put a sole proprietorship out of businesses as the legal process is expensive and long lasting, and combining these two issues, very few sole proprietorships have the ability to withstand them. Others shy away from sole proprietorships because often times the startup costs of opening a business (like buying property and equipment) are too hefty for one person to invest all by themselves. Businesses could potentially be expensive to start, and if “capital is required from other investors” it will not be available from sole proprietors (Harroch). It is important to recognize that many large, nationwide, and valuable businesses have found their roots
| A sole proprietorship is easy to create; there is minimal creation cost and time.The single owner has autonomy in decision making; sole owner makes all decisions related to the business and has complete ownership of business’s finances.
SOLE PROPRIETORSHIP: Sole proprietorships are the most common form of business in the United States. You and your business are one in the same. While being your own boss as its advantages, like working your own hours and collecting all profits made by the business, there are some disadvantages. For starters is coming up with starting working capital. Most Sole Proprietors have to seek funds from other sources.
Mary McDonald, an 86-year-old woman, was frequently complaining about the high cost of maintenance of her house and high property taxes. She decided to cancel her fire insurance to reduce expenses. Mary’s daughter was aware of her mother’s concern about the property, and she took Mary to the lawyer’s office to sign some papers that would protect her mother. When Mary came to the lawyer’s office, she was advised that the paper she was going to sign was the deed to the property. Mary signed a document. Later on, when the municipal tax bill arrived, Mary McDonald was really surprised to see that the property was in her daughter’s name.
The individual owner is limited to personal money and loans when it comes to funding the business.
40. Principle of Law: In this case, Esposito hired Excel Construction Company to repair a porch roof. All terms of the agreement were specified in a written contract. And the dispute occurred when Excel had repaired the rear porch roof because in the agreement failed to specify whether it was the front or rear porch that needed repair. Under civil law, two parties here had signed a civil contract in writing. Because the contract failed to specify clearly front or rear porch roof, Excel completed its obligation and didn’t break the contract.
• Control: A sole proprietor has total control of the company and they make all the good decisions and they must deal with decisions that did not turn out the way they intend. The other notable factor in being a sole proprietor of a business is what would happen to the business if the owner became ill or died; typically the business would stop operations based on the structure and debts would need to be resolved as well as customer commitments would need resolving based on the type of business.
1. Identify the ethical, strategic, operational, and financial issues in this scenario and list them in priority order from most to least critical.
disagreements will happen (is not when it happens). Everyone that runs a business always has his or
Robert Briggs and his wife purchased a home located at 167 Lower Orchard Drive, Levittown, Pennsylvania. They made a down payment and borrowed the balance on a 30-year mortgage. Six years later, when Mr. and Mrs. Briggs were behind on their mortgage payments, they entered into an oral contract to sell the house to Winfield and Emma Sackett if the Sacketts would pay the three months’ arrearages on the loan and agree to make the future payments on the mortgage. Mrs. Briggs and Mrs. Sackett were sisters. The Sacketts paid the arrearages, moved into the house, and continued to live there. Fifteen years later, Robert Briggs filed an action to void the oral contract as in violation
Having a sole proprietorship has many advantages and disadvantages for PODS. Some advantages to having a sole proprietorship would be the ease and cost of formation, having more flexibility and control, able to make quick decisions, minimal legal costs, closing business distribution and use of profits (Ferrell, Hirt, and Ferrell,2014) This is a wonderful option for someone who is just starting out and wants an easier way conduct business. Sole proprietorship also can have some disadvantages such as only having access to limited funds, lack of continuity due to investors not wanting to invest their money into something that has little or no history (Ferrell, et al., 2014). Most new business owners are not able to hire employees which have the qualified skills needed to get the company up and going successfully.
After the creation of a business plan, the next step to operating a business is the selection of an appropriate business structure. Different legal forms of business ownerships affect different managerial and financial factors from the business names to the tax obligations (Gregory, n.d.). The most common forms are sole proprietorship, partnership, cooperatives, and corporations. There are different types of corporations in the business world, but the two most general corporation types are S Corporation and Limited Liability Company (LLC) (Ferrell et al., 2013). The sole proprietorship is the easiest and most basic form of business ownership. It is owned and run by one individual, which is the proprietor. The individual is entitled to all profits and is responsible for all the business’s
The advantages to the sole proprietorship are single control over the business and its decisions, easy to start up, less regulations and paperwork burden that the other types of business. The disadvantages are unlimited liability for their company debts and actions. The law does not recognize any distinctions between the owner’s business assets and personal assets. Banks are very skeptical about lending to these types business because there is only one person to hold liable for repaying the debt.
Is the most common business type, where the business is operated and owned by a single individual. In this type of business, the sole proprietor provides capital, does not share profit or loss and runs the business alone. As such, the business and the owner are indistinguishable for tax and legal purposes (Dlabay, 2011). To differentiate this business from other business types, a sole proprietorship is discussed under the following characteristics.
There are a number of forms of ownership that the business can take. The main forms are sole proprietorship, partnership, Limited Liability Corporation, corporation and S corporation. There are advantages and disadvantages to each of these forms that will be discussed in this section. A sole proprietorship essentially has the person as the business. In this situation, the proprietor bears all of the risk involved in the business. Business income flows through to the proprietor's personal taxes. For some individuals there are tax advantages, but for many the appeal of the sole proprietorship is its simplicity. The IRS defines a partnership as a relationship existing between two or more individuals who joint to carry on a business. Partners divide income according to their own agreement and that income flows through to their personal taxes. Partners also have a high level of liability for any legal action that befalls the company.
But with advantages, there are also disadvantages of owning your own business. Five disadvantages of a sole proprietorship are: 1) The owner is personally liable for all debts and incurs all losses. The sole proprietor is responsible for all debts that the company owes. The owner takes all losses. There are no other owners to