Business Structures Case

Business Structures

Tina Shackelford

FIN 571

August 10, 2015

Mr. Welbeck

Business Structures

 Review of the videos "Your Business Structure" and "Corporate Business Structures" found on the Electronics Reserve Readings (ERR) page enables the learner to identify different business structures and their advantages and disadvantages.

Sole Proprietorships

As stated in the video "Your Business Structure", the sole proprietorship business structure is used in single ownership companies. Parrino, Kidwell, & Bates, 2012 estimated that three quarters of all businesses in the United States are owned and operated as sole proprietorships (p.6). The key elements of this type of business structure are the operational and financial advantages and disadvantages.    The primary advantages of sole proprietorship are the ease in which a one may start and operate a business and keep all business profits. In addition sole proprietorship profits are taxed at the personal income tax rate, which is lower than the rate available to company owners using other business structure such as corporate entities.  While a sole proprietor reaps the rewards of a successful business during economic growth they may encounter the downside of economic conditions. As sole proprietor, the owner is responsible for all obligations incurred through business operations. Furthermore, the law assigns unlimited liability where creditors may pursue the owner’s personal assets for debt collection. Another disadvantage of sole proprietorship is financing business growth is limited to the proprietor’s wealth meaning the company growth is essentially limited to profit reinvestment (Parrino, Kidwell,  & Bates, 2012 p.7).  An entrepreneur may seek another business structures such as partnerships that reduce individual start- up investment or provide limited liability protection.