Fin 571 Week 1 - Business Structure Advice

Business Structure Advice

Cresencio Camero III

FIN 571

January 15th, 2015

Sherry Wang

Business Structure Advice

Dear John,

 I commend you on taking the first steps in starting a new company. This endeavor will be an exciting yet challenging move for you. When deciding to start a business, you must choose a business structure to get started. There are six different business types for you to choose from, each of which has its pros and cons as well as tax and legal implications. I will describe each of the six business types to give you a better idea of what you can choose..

Sole Proprietor

        The sole proprietor is one of the most common business types for new start-ups. It is usually held by one owner and a small group of employees. It is the easiest structure to begin with. The owner is responsible for filing taxes and paying the bills. Tax and legal implications are held to by the owner. For example, if the business gets sued or takes a substantial loss, the owner may have to pay out of personal funds to cover the costs.

Partnership

        Two or more owners can start a business together using this type of activity. Each member of the partnership contributes to the company equally, and profits are shared the same. Partnerships can be more expensive to establish. A partnership does not pay tax on its income but "passes through" any profits or losses to the individual partners (Entrepreneur.com, 2015).

Cooperative

        Different from the other business types, the cooperative business type is operated by a group or an organization that will benefit those using its services. Profits are distributed equally between the members of the organization. Taxes are filed individually by each member as the business does not pay income taxes as a business entity. The con for this type is that if all members do not cooperate, the business will not do well.

Corporation

        Shareholders own the corporation and are not liable if anything happens to the company. Profits from the company pay the taxes for the business. The pros for starting a corporation are that it has can generate capital, has limited liability, and is attractive to potential employees. The cons include, corporations are expensive to start and difficult to maintain. They are also highly regulated.