Legal Forms of Business
Legal forms of Business
The process of starting a business can be a challenging one. From choosing a business name, identifying the product to sell and where all require thoughtful decisions. All these decisions also need legal and practical considerations. To understand more about the different forms of business, it is important to consider the right structure for the business (Legal Forms, 2006).
Sole Proprietorship
A sole proprietorship simply means a business with one owner. With many forms of organizations out there, this is the most common. In a sole proprietorship, a business organization is not separate from its owner, just under a business name in which the owner represents him or herself to the public (Lee, 2011).
Scenario – An individual operates a single taco truck alone, where all the investments are their own and profits are not shared by anyone. As the owner of the taco truck, the individual also runs the daily operations, cutting down on his overhead. This type of business is preferred as a sole proprietorship as the profits and operations are limited. As the sole proprietor, the individual gets a business license and begin operations. This type of business would want to limit their expenses or profit sharing and is best operated under the sole proprietorship.
Partnership
A partnership is a form of business which is somewhat similar to sole proprietorship but with two or more owners. Just like sole proprietorship, the partnership is inseparable from its owners, which means the name is different otherwise the owners are representing themselves in public. However, in a partnership, each partner can be held responsible for the actions of the other partners and partnership can hold property and incur debt in its name (Lee, 2011) Scenario – Running a large restaurant, which requires a large initial investment, may result in two or more individuals coming together to operate the business under a partnership. They plan to share the profits
The process of starting a business can be a challenging one. From choosing a business name, identifying the product to sell and where all require thoughtful decisions. All these decisions also need legal and practical considerations. To understand more about the different forms of business, it is important to consider the right structure for the business (Legal Forms, 2006).
Sole Proprietorship
A sole proprietorship simply means a business with one owner. With many forms of organizations out there, this is the most common. In a sole proprietorship, a business organization is not separate from its owner, just under a business name in which the owner represents him or herself to the public (Lee, 2011).
Scenario – An individual operates a single taco truck alone, where all the investments are their own and profits are not shared by anyone. As the owner of the taco truck, the individual also runs the daily operations, cutting down on his overhead. This type of business is preferred as a sole proprietorship as the profits and operations are limited. As the sole proprietor, the individual gets a business license and begin operations. This type of business would want to limit their expenses or profit sharing and is best operated under the sole proprietorship.
Partnership
A partnership is a form of business which is somewhat similar to sole proprietorship but with two or more owners. Just like sole proprietorship, the partnership is inseparable from its owners, which means the name is different otherwise the owners are representing themselves in public. However, in a partnership, each partner can be held responsible for the actions of the other partners and partnership can hold property and incur debt in its name (Lee, 2011) Scenario – Running a large restaurant, which requires a large initial investment, may result in two or more individuals coming together to operate the business under a partnership. They plan to share the profits
References: Elgin, J. (2002). Choosing a Legal Form for Your Franchise. Entrepreneur. Retrieved from http://www.entrepreneur.com/article/55206 Lee, T. (2011). Choosing the Legal Form of Ownership for Your Business. SBTDC. Retrieved from http://asbtdc.org/DocumentMaster.aspx?doc=2864 Nelson, S. (2008). LLC Kits & More. LLC VS LLP Explained. Retrieved from http://www.llcsexplained.com/Whats-the-Difference-between-an-LLC-and-LLP.htm Which Legal Form Is Best for Your Business? (2006). Inc. Retrieved from http://www.inc.com/articles/2000/06/19438.html