Question

For a would-be entrepreneur, selecting the proper form of business organization is a very important first step in the process. After some consideration and an assessment of your skills and education, you have decided to start a medical billing service that will provide services to providers in the local geographical area. Ideally, you would like to service physicians, dentists and hospitals.

Determine which of the three forms of business organization (sole proprietorship, partnership or corporation) would be the most appropriate for your new business. Why did you select the form of business organization that you chose? Identify at least three things that should be taken into consideration when making this selection. (4 points)

Based on the form of business organization that you selected, answer the following questions:

a.     How easy or difficult is it to set up this form of business organization? (4 points)

b.     What type of liability do you have in this form of business organization? (4 points)

c.     What tax implications do you need to consider for this form of business organization? (4 points)

d.     What will happen to the business if something happens to you, the business owner? (4 points)

Answer 1

Sole proprietorship would be appropriate form of business organization for this new business.

Resons for thinking of Sole Proprietorship as the organization:

1. It is easy to establish. No burden of legal duties to be undertaken in starting this form of business.

2. No need to share the profit.

3. Business would be run by sole knowledge of the proprietor.

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a. It is very easy to set up sole proprietorship form of business organization.

b. The liability of the business organization should even be fulfilled by the personal assets of the proprietor. It has unlimited liability.

c. No further tax implications for this form of business organization. Federal Taxes are to be paid based on the individual tax rates and for Service rendering, the indirect tax would be paid based on the statutory limits prescribed.

d. If the business owner passes away, the proprietorship can be carried on by the legal heirs but in case on no legal heirs, the business stands closed.