There are several types of business structures, each with advantages and disadvantages. A sole proprietorship gives you complete control of your business. A partnership is a simple structure when two or more people own the business together. Two other types of corporate structure are Limited Partnerships (LP) and Limited Liability Partnerships (LLP). Another type of business structure you may have heard of is a cooperative, which is an organization owned and operated for those using its service. This assignment will explore Limited Liability Companies (LLCs) and two types of corporations: S-Corporations and C-Corporations.
Assignment Details
Review the following documents comparing business entities:
Business Structures (IRS).Links to an external site.
Choose a Business Structure (SBA).Links to an external site.
Create a matrix charting the pros and cons for LLCs, S-Corporations, and C-Corporations. Answer the ten (10) questions below in the matrix.
Cost: What are the comparative costs of setting up each form?
Ease: What is the relative ease for setting up each form? What steps are required?
Termination: What is the state requirement for continuity?
Public Information: How important is it that your personal information is shared or not shared with the public?
Risk: Differentiate the levels of personal liability that exist for owners in each form of a business. What form provides the best protection to insulate owners from personal liability?
Operation: What form provides the best support and control risk balance for the primary owner’s business and management intentions?
Capitalization: Is there a risk of undercapitalization? If so, what impact will it have on a start-up business? What circumstances trigger the need to raise outside capital to avoid increased liability? Is there a company form that is more conducive to raising capital? How is that accomplished?
Selling: If owners wish to sell their interest in a company, what form best accommodates that situation?
State Taxes: What are the tax liabilities from the state in setting up the business for each form?
Expansion: Which form provides the greatest flexibility in the event of expansion?
Note: Entries in the matrix must be complete sentences that fully explain the definition of each entry. All subquestions must be answered.
Your table should look like this example: Corporate Organization Pros and Cons Matrix (DOCX).
Links:
https://www.irs.gov/businesses/small-businesses-self-employed/business-structures#:~:text=Your%20form%20of%20business%20determines,%2C%20corporation%2C%20and%20S%20corporation.
https://www.sba.gov/business-guide/launch-your-business/choose-business-structure
