Question

Go to the discussion room and tell me what form of business ownership you have chosen for your imaginary business. You must tell me why you chose that form of ownership, listing two or three of the advantages of that form of ownership, and also listing two or three of the disadvantages of that form of ownership. You must then describe one of the forms of business ownership that you did NOT choose for your business, and tell me why you did NOT choose that form of ownership for your business, listing two or three of the advantages of that form of ownership, and two or three of the disadvantages.

Here are the forms that we will examine:

1. Sole Proprietorships.
2. Partnerships – General Partnerships.
3. Partnerships – Limited Partnerships.
4. Corporations – Ordinary corporations, known as “C Corporations”.
5. Corporations – Subchapter S Corporations, known as “S Corporations”.
6. Limited Liability Companies – also known as “LLC’s”.

Answer 1

As given in the question, there are 6 forms of ownership are stated, I would choose Limited Liability Company (LLC).

Limited Liability Company is a private limited company that has advantages of both partnership and limited liability company. It is also the simplest form of structuring a business. There are several advantages of this form of ownership:

• Limited Liability - Unlike Partnership, LLC partners have limited liability. This means that the partners are separate from its legal entity. Partners are liable to the extent of their contribution in company and their personal assets cannot be used to pay company's debts.
• Ownership and Management Flexibility - LLC can have any number of partners they want. LLC structure of ownership and management is not like any corporation, rather LLC's owner have complete control over running the business and making decisions.
• Tax Benefits - One of the biggest advantages of LLC is tax benefits. Internal Service Revenue classify the LLC as either sole proprietor or partner (depending on the number of owners), therefore, LLC always enjoy 'pass-through' taxation.

In addition to advanatges there are also some demerits of this form of ownership:

• More Expensive - Formation of LLC is expensive as compared sole proprietorship or any other general partnership.
• Transfer of Ownership - Transfer of ownership is harder as compared to a corporation.
• There is limited life of LLC.

I will not Choose Sole Proprietorship because it has following disadvanatges

• Unlimited Liability - In Sole proprietorship, there is songle owner who is owenr of all assets but also responsible for all the liabilities. If the assets of business are not sufficient, then personal assets of owner will be used to pay off debts.
• Limited Capital - There is an access to limited capital in this form. The capital required for business expansion may not be met from personal savings of owner.
• Limited Managerial Ability - A single person cannot be an expert in all fields. Also, an expert from every field cannot be hired due to limited resources.

There some advanatges also of Sole Proprietorship

• Complete Control over business - As the entire control is with the owner, quick decisions are made.
• Less formalities in incorporation and closure - There are no separate rules and regulations for incorporation and closure of business. Therefore, less dociumentation and formalities are required in this form og business.
• Sense of Satisfaction and Achievement - Owner can take decisions by himself. Moreover, he will not be accountable to anyone. So, it boosts the self-wprth as well as great sense of satisfaction and achievement.