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Business Structure Essay

1085 words - 5 pages

My brother and I want to venture into an e-commerce business where we would create crafts and sell them online. When starting up a business, it is crucial to look into some factors in determining what kind of business structure would be more effective especially to an online business. Some of the factors to consider when deciding which business or legal structure is best for our company are: “how much control both of us intend to have on the business, how vulnerable the business is towards lawsuits, what type of tax implications will be impacted by the business structure we select, if we intend to use the profits to reinvest back into the business” (Bill, H., 2010). The most five major types ...view middle of the document...

Forming a Limited Liability Company (LLC) might be complex and costly than sole proprietorship and partnership, but as long as we follow the rules of governess relating to LLC, it would be all worth it, mostly because we are in the e-commerce line of business where we need personal liability for business debt and court judgment to be limited. As an internet business owner, one is more vulnerable to lawsuit because the long arm statute relating to jurisdiction which applies to e-commerce owners regardless of what state the owners are residing or operating from. Operating businesses over the internet, means that we are not just operating in one state but in multiple states as well, which is where the issue of tax emerges from, and no one can predict where or what the tax rates apply. Since the company or business is formed as an LLC, the business itself is not taxable; instead all the profit and loss flows through to all members of the company, who are now taxed on individual basis. Also, LLC provides more flexibility in the allocation of profit and loss, and also the delegation of managerial duties (Adler, 1999-2009).
One of the issues that is plaguing business owners relating to LLC is that since the limited liability is a new business form, there hasn’t been a body of legal precedent governing LLCs. Therefore, LLC owners and professionals may face operating questions and issues for which they have little or legal guidance. with that said, this concerns lessens as the state develops a reliable body of laws concerning LLCs, and it is not much of an issue for a small business like us (Spadaccini, 2009). This is why a Uniform Limited Liability Company Act (ULLCA) was issued which covers the formation, operation, and termination of LLCs. Each state must determine through its legislature whether the ULLCA will become state law, and forty-eight states have adopted all or part of the Uniform Act as its state statute (Kubasek, 2009). Also the issue of the LLC expanding can be a disadvantage for LLCs owners because venture capitalist tends to shy away from investing in LLCs. Basically if for the lifespan of our business, which we intend to make it a family organization, grows and...

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