Business Structure Essay

635 words - 3 pages

Business Structure Advice
Sandra Martinez
FIN/571
October 8, 2015
Mike Flores

Business Structure Advice

Business Structure Advice
FIN/571
October 8, 2015

From: Sandra Martinez
To: John, Owner
Subject: Advice in starting your business
John, in response to your request, for business structure advice, I believe the following business advice will be extremely helpful to lead you to the best decision. I would advice to develop steps to a business plan. First, write out a business plan. The business plan is to structure a successful business, which will outline and define the goals and guidelines of how to accomplish and structure those goals. A business plan also will help to assist owners with organizing thoughts, developing career ideas and how to lead a business.
First and foremost, you must know which business structure and option there are; these options will include sole proprietorship, partnership and corporation. A partnership could be general ...view middle of the document...

Being a sole proprietor, one should keep sufficient records of federal income tax requirements regarding all areas of the business. Sole proprietor must also pay self-employed taxes. The IRS calls this “pass-through” taxation, because business profits pass through the business to be taxed on the personal tax returns.
Another option is to form a partnership. A partnership is the relationship between two or more persons, who join together to carry on a business. The advantage of forming a partnership is all partners can contribute ideas, skills, and financially provide and invest more into the business. Disadvantages of a partnership are jointly there will be individual liability, disagreements among partners and shared profits. For tax purposes a partnership will need to file an annual return to report income, deductions, gains and losses of the business. The business pays no income tax.
And finally, if you choose a business structure under a corporation, there are separate legal entities to start. You should be aware that all stockholders are safe from any business predators. Corporate assets need to be separated from the corporation’s liabilities. An advantage of having a corporation is that your individual resources are not threatened from business liabilities but a disadvantage is that the business structure is much more complex and difficult to run. Now if you decide for a Subchapter S corporation, then you will have specific IRS tax status. This type of corporation business owners prefer to be taxed as sole proprietorship or partners. Advantages for this corporate business structure are tax savings, business expense tax credits and independent life separate from shareholders. Disadvantages of a corporation are the strict guidelines and shareholders compensation requirements.
Mr. Owner, finally, a few important ideas to enhance your business plan. The location of a business is very important. I hope I was able to briefly narrow down on your questions about starting your own business. It was my intent to provide you with the different business structures and some advantages and disadvantages of each structure. If there are any questions that you still may have, please feel free to give me a call at my office.

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