University of PhoenixBUS/415: Business LawDecisions, decisions, decisions. Many decisions need to be made when considering a new business venture. Only two-thirds of new businesses survive at least two years (U.S. Small Business Administration, n.d., para. 7), therefore, careful consideration needs to be taken when making these decisions in order to succeed. Before starting a business, an individual needs to become acquainted with the different types of business organizations in order to decide which type it should operate as. Differentiating between the strengths and weaknesses of the business organizations and the legal issues that impact the structures will aid in determining what type is best suited for the business venture. After reviewing the different factors involved, an initial business plan for Designer Flooring, a high-end flooring contractor will be developed.
Types of Business OrganizationsMany types of business organizations exist: sole proprietorship, general partnership, limited partnership, limited liability company, corporation, S-corporation, or franchise.
Choosing the type that is best suited for the business venture and business owner involves differentiating between the strengths and weaknesses of the business organizations.
Sole ProprietorshipA sole proprietorship is the easiest type of business organization to create. The business is owned by one person and formed by obtaining a city license; no federal or state government approval is required. A sole proprietorship remains in existence until the business is dissolved or the owner dies.
Strengths. The owner makes all decisions regarding the business including when and who to sell the business to, if so desired. An owner receives all the business profits.
Weaknesses. The sole proprietor has unlimited liability and the capital is limited to Personal funds and loans. The sole proprietorship is not a taxable entity and business income is treated as personal income which could raise the tax bracket in which the income is...