Running head: BUSINESS STRUCTURES

Business Structures
Darlene Broussard
FIN/571
August 31, 2015
Professor James Carlin

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Business Structures

Business Structures
In this week's assignment we have learned about what structures to consider when you
are establishing a business. It is very important to see the advantages and disadvantages of each
one of the business structures when you are planning a business. There are three types of
business structures and they are; Sole Proprietorship, Partnership, and Corporation.
Sole Proprietorship
The Sole Proprietorship is a business that is owned by one person. This business is the
least expensive, least regulated, and the easiest business structure to start up. The sole
proprietorship advantages are that you do not have to share control of business decisions with
anyone else nor profits. But the disadvantages are that sole proprietors have unlimited personal
liability for any debts and obligations that are incurred by the business.
Partnership
A Partnership Business is formed legally with two or more owners. This agreement
specifies the capital amount that each partner contributes, the decision making process, the
division of profits, specification of the role of each partner has, and the transfer of specified
events. The advantages of having more than one owner is an increase in borrowing or capital
capacity, and there is more skills and knowledge that each owner brings to the table. There are
two types of partnership and they are general and limited. The disadvantages of the general
partnership is there is unlimited liability to all the partners who manage the day to day activities
of the business regardless of how much capital each one contributed they all share in the same
amount of responsibility. With limited partnership they manage the business and they are

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responsible for the debt and obligation of the business which cannot exceed the amount of capital
that they contributed.
Corporation
A Corporation is a entity that is separate from its owners. When you start a business
under this particular type of structure you will incur more expense and complexity and because
of the complexity it would be wise to seek help from an attorney. Corporate businesses structures
have both advantages and disadvantages and we will look at General Corporations, Subchapter
S, and Limited Liability Company.
General Corporation
The General Corporation is the most common type of corporation. This corporation is a
separate legal entity which is owned by an unlimited number of stockholders and the
stockholders are protected from business creditors. A advantage of the general corporation is that
the stockholders personal assets are protected from the debt or liabilities of the business.
Subchapter S
The Subchapter S is a general corporation that has a special IRS tax status. This business
is compose of mostly small business owners and they prefer to be taxed as a sole proprietor or
partnership with advantages of limited liability. The advantages of the Subchapter S is business
expense tax credits, separate independent life from shareholders, and tax savings. The
disadvantages are there are strict operational processes and shareholders compensation
requirements.
Limited Liability Company (LLC)
Entrepreneur's have the option of an LLC because this business is not a corporation but
similar to the S Corporation. The advantages are there are added flexibility with the general

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managing and operations of the company and less restrictions compared to the S Corporation.
This would be an ideal structure because it is not as difficult to establish and there is limited
liability protection for the entrepreneur.
When trying to start a business and building a plan it is important to consider the
advantages and disadvantages of each business structure to ensure that the obligations and
requirements of that business structure will work with your desired business plan.

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References
Parrino, R., & Kidwell, D. (2009). Fundamentals of Corporate Finance. John Wiley and
Sons, Inc.
(Video) (2011). Corporate Business Structures. Planning Your Business: Research, Goals,
and Business Plans.
(Video) (2011). Your Business Structure. Planning Your Business: Research, Goals, and
Business Plans;