Legal Forms of Business Essay

2052 Words Jul 2nd, 2012 9 Pages
Legal Forms of Business

Introduction The different forms of business include sole proprietorship, partnership, limited liability company, S corporation, franchise and corporate form. However, depending on the type of business and the number of individuals involved in starting the business can determine what the best form of business to suit the organization. The advantages and the disadvantages must be weighed and thought out carefully in order to minimize risks and possible litigation issues that could arise.
A sole proprietorship is the most basic business form and is frequently utilized by a single person owning or running a business on his or her own. Such business enterprises are often run from the
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The individual must provide all the capital investment and the responsibility of the debts and capital not paid if the business is unsuccessful the liability remains on the sole proprietor (Cheeseman, 2010).
Partnership
A partnership is the legal structure for a business enterprise when two or more people start a business. There are different types of partnerships and these include general partnerships, limited partnerships and limited liability partnerships. In order to set forth how the business will operate, the partners should enter into a partnership agreement. The partnership agreement should specify who the partners are, what their roles and responsibilities are, and most importantly spell out how the profits will be divided between or among the partners.
A general partnership is a business structure where each partner is liable beyond what he or she has invested in the enterprise. Also, each partner can take actions that may bind the entire partnership. A general partnership is not a taxable entity because the income and losses pass to each partner who, in turn, reports the profit and loss on individual tax returns. Because the income and losses pass to each partner, these entities are also referred to as "pass-through" enterprises. In a general partnership, the profits and losses are normally distributed equally between or among the partners. On the other

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