Question

Identify the three legal business structures that can exist in a professional practice. Address the factors that make them unique.

Answer 1

The three legal business structures that can exist in a professional practice and the factors that make them unique are :-

• Sole Proprietorship  : It is the simplest type of structure. Any single person can become the sole owner of the business and simply have to begin business operations to create a sole proprietorship. There are no papers to file and no fees to pay for setting up a sole proprietorship. That single person has to pay taxes on any business profits and he/she is personally liable for any liabilities.
• Partnerships  : In this type of structure, there are two or more owner for any business. Each partner will pay the taxes on his share of business profits. Each partner is personally liable for any liabilities including any debts or claims that the business is responsible for.
• Nonprofit Corporation  : It is a corporation that is created for charitable, educational, religious, or scientific purpose. Funds for the corporation are raised by the charitable donations from the public, or by seeking private grant money from companies and individuals. The most important advantage of this type of corporation is that the money that is taken in for the charitable purpose is not taxable by any government.

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