Question

Identify and briefly describe at least 4 key factors in choosing the best form of organization for a business. Describe, compare and contrast sole proprietorship, partnerships and corporations and identify the pros and cons of each. Identify at least 2 different forms of partnerships and briefly describe the characteristics of each. Identify at least 3 different forms of corporations and briefly describe the characteristics of each. Terminology Negotiable instruments, endorsements, forgery, creditor, debtor, debt – secured or unsecured, liens, garnishment, bankruptcy, mortgage Bank relationship – agency, contract, fiduciary, debtor/creditor Employees vs. independent contractors, liability differences, legal differences, discrimination, Title 7 (Civil Rights), race, religion, national origin, sex, age, disability, union membership and representation, Employment at Will. Choice of business ownership structure – sole proprietor, corporation, partnership, stockholder’s rights (vote, certificate of ownership), common stock, general partner, limited partner, mergers.

Answer 1

The business structure you choose influences everything from day-to-day operations, to taxes, to how much of your personal assets are at risk. You should choose a business structure that gives you the right balance of legal protections and benefits.

Sole proprietorship

A sole proprietorship is easy to form and gives you complete control of your business. You're automatically considered to be a sole proprietorship if you do business activities but don't register as any other kind of business.Sole proprietorships do not produce a separate business entity. This means your business assets and liabilities are not separate from your personal assets and liabilities. You can be held personally liable for the debts and obligations of the business.

Partnership

Partnerships are the simplest structure for two or more people to own a business together. There are two common kinds of partnerships: limited partnerships (LP) and limited liability partnerships (LLP).Partnerships can be a good choice for businesses with multiple owners.

Corporations

A corporation, sometimes called a C corp, is a legal entity that's separate from its owners. Corporations can make a profit, be taxed, and can be held legally liable.Corporations offer the strongest protection to its owners from personal liability, but the cost to form a corporation is higher than other structures. Corporations also require more extensive record-keeping, operational processes, and reporting.Unlike sole proprietors, partnerships, and LLCs, corporations pay income tax on their profits.

Corporations have a completely independent life separate from its shareholders. If a shareholder leaves the company or sells his or her shares, the C corp can continue doing business relatively undisturbed.

Corporations can be a good choice for medium- or higher-risk businesses, businesses that need to raise money, and businesses that plan to "go public" or eventually be sold.

Business structure	Ownership	Liability	Taxes
Sole proprietorship	One person	Unlimited personal liability	Personal tax only
Partnerships	Two or more people	Unlimited personal liability unless structured as a limited partnership	Self-employment tax (except for limited partners) Personal tax
Corporation	One or more people	Owners are not personally liable	Corporate tax