Legal Forms of Doing Business
Running head: LEGAL FORMS OF DOING BUSINESS
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Legal Forms of Doing Business University of Phoenix: LAW/531 March 2013
LEGAL FORMS OF DOING BUSINESS Legal Forms of Doing Business
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Doing business in the United States can be a complicated matter. An entity wishing to conduct business must first chose a form upon which to do business. Some forms of doing business are a sole proprietorship, partnership, limited liability partnership, limited liability company, S corporation, franchise, and corporation (Cheeseman, 2010). Sole Proprietorship A sole proprietorship is the “simplest form a business organization” because there are no formalities or the need for federal or state approval (Cheeseman, 2010, p. 530). It is composed of a sole owner who has the right to make all management decisions, owns all of the business, and receives all of the business’ profits. For example, Maggie just received her degree in the culinary arts and decided that she will earn her living selling baked goods. Rather than joining a pre-existing company, Maggie decides to go into business for herself. Maggie chose to go into business for herself because she wants to have sole decision-making concerning the type of goods sold, and she would be entitled to 100% of the profits due from her culinary skills and hard work. Partnership Unlike a sole proprietorship, which is owned by a single person, a partnership is a “voluntary association of two or more persons for carrying on a business” (Cheeseman, 2010, p. 533). In a partnership, members are entitled to the following rights and responsible for the following liabilities: (i) an equal share of profits; (ii) equal rights in the conduct and management of the business; and (iii) jointly and severally liable for torts and breaches of trust (Cheeseman, 2010). For example, Margie and David are married and would like to start a restaurant. Since they are married, Margie and David think that a partnership would be an ideal form of doing
1
Legal Forms of Doing Business University of Phoenix: LAW/531 March 2013
LEGAL FORMS OF DOING BUSINESS Legal Forms of Doing Business
2
Doing business in the United States can be a complicated matter. An entity wishing to conduct business must first chose a form upon which to do business. Some forms of doing business are a sole proprietorship, partnership, limited liability partnership, limited liability company, S corporation, franchise, and corporation (Cheeseman, 2010). Sole Proprietorship A sole proprietorship is the “simplest form a business organization” because there are no formalities or the need for federal or state approval (Cheeseman, 2010, p. 530). It is composed of a sole owner who has the right to make all management decisions, owns all of the business, and receives all of the business’ profits. For example, Maggie just received her degree in the culinary arts and decided that she will earn her living selling baked goods. Rather than joining a pre-existing company, Maggie decides to go into business for herself. Maggie chose to go into business for herself because she wants to have sole decision-making concerning the type of goods sold, and she would be entitled to 100% of the profits due from her culinary skills and hard work. Partnership Unlike a sole proprietorship, which is owned by a single person, a partnership is a “voluntary association of two or more persons for carrying on a business” (Cheeseman, 2010, p. 533). In a partnership, members are entitled to the following rights and responsible for the following liabilities: (i) an equal share of profits; (ii) equal rights in the conduct and management of the business; and (iii) jointly and severally liable for torts and breaches of trust (Cheeseman, 2010). For example, Margie and David are married and would like to start a restaurant. Since they are married, Margie and David think that a partnership would be an ideal form of doing