Choosing Business Structure

Starting a business can seem like a daunting task, when really there is a systematic approach that an entrepreneur can take to setting up a business. There are many factors to consider when setting up a business structure; these factors include start up cost, operating costs, liability, and taxation. A business owner will also want to look at whether or not they may want to expand in the future, which will also play a factor in what type of business they should set up. This paper will look at the advantages and disadvantages of sole-proprietorships, partnerships, limited liability companies, and corporations. As well as look at what courts can do if a business operates outside the scope of accepted business practice. There is no “one size fits all” company structure, which is why a potential business owner needs to look at and evaluate all the different options before choosing a type of business to set up.

The first step to setting up a business is to pick a business structure. Sole-Proprietorships are the oldest and most common form of business making up about 72% of the businesses in the United States.(Ref. 3, pg.76) It is a simple form of business to set up; all you need is a product or service to offer, any applicable licenses or permits, and a business name. Although sole-proprietorships are the most common form of business, they only account for about 5% of the total profit in the US. The advantages to a sole-proprietorship are that they are easy to set up and cheap to operate. There are no filing fees with a state or national government, and the book keeping requirements are very relaxed.

The disadvantages to a sole-proprietorship are the constraints on generating operating revenue, unlimited liability, and taxation me...

... middle of paper ...

...or their business.

Works Cited

1. Larson, Aaron, “The Sole-Proprietorship,” expert-law.com [online], August 2004, http://www.expertlaw.com/library/business/sole_proprietorship.html, [retrieved 20 February 2010]

2. Unknown, “Corporations vs. LLC’s,” findlaw.com [online], http://smallbusiness.findlaw.com/business-structures/llc/corporations-compare-llc.html, [retrieved 05 March 2010]

3. Brue, Stanley L., Flynn, Sean M., McConnell, Campbell R., “Macroeconomics: Principles, Problems, and Policies,” McGraw-Hill International Edition, 18th edition, New York, New York, 2009, pg. 73-88.

4. Jentz, Gaylord A., Miller, Roger L., “Business Law Today,” South-Western Cengage Learning, 8th edition, Masan, Ohio, 2008, pg.705-824.

5. US Government, “2009 Individual and Corporate Tax Rate Schedules,” irs.gov [online], http://www.irs.gov/, [retrieved 03 Mar 2010]