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Lit1 Task 1 Essay

1803 words - 8 pages

Types and Characteristics of Business
LIT Task 310.1.2-01-06
Alicia R. Wilson
Western Governors University Texas

Abstract
In Chapter 11 of the Legal and Ethical Environment of Business, examples of business structures were described. It is clear that there are pros and cons to starting any business; however it is very apparent that it is still the American dream to start a company. The reading assignment included descriptions on Sole Proprietorship, General Partnership, Limited Partnership, C-Corporation, S-Corporation, and a Limited Liability Company. In this task, a breakdown of characteristics, advantages, and disadvantages will be described about each organizational form.
Types ...view middle of the document...

Another large disadvantage is personal liability, which means should something detrimental happen, the owner becomes personally liable. An example would be if the business owner is an exterior painter and he spills paint on a vehicle, the painter is responsible for the damages. If the painter cannot pay for the damages, the vehicle owner can take legal action and the painter’s personal assets could be jeopardized.
Lastly, a sad disadvantage to sole proprietorship is if the business owner perishes, the business is immediately dissolved. Also if the business has unpaid debt, the entrepreneur’s family becomes responsible for payment unless the proper insurance coverage is in place to pay off debts.
* Liability- The sole proprietor is liable should anything happen
* Income Taxes- Individual taxes are filed rather than business/entity tax
* Longevity/Continuity- Business no longer exists if the proprietor quits or dies
* Control- The sole proprietor has all decision making control
* Profit Retention- The sole proprietor takes care of all the distribution
* Convenience/Burden- For a sole proprietorship there is no cost for startup unless a business license is required
* Location- Typically a startup company begins in the home and can be moved anywhere at any time.

General Partnership1
A general partnership is a verbal agreement to run a business together and share in the management, income and expenses of the business. If the partners chose to go the extra step, they can put a contract together to bind their agreement, which can be appropriately termed as an article of partnership. This agreement includes a buy/sell agreement so everyone walks away with what they put in should the partnership dissolve.
A general partnership is simply an agreement, so taxes are handled personally rather than at the business level like a corporation; however taxes are noted on what is called an information return to report the total income.
General partnerships are liable in the same way a sole proprietor is in regards to accidents and errors. The great disadvantage is, if only one of the partners was responsible for an error, the other is equally responsible even if he/she weren’t involved.
Like the sole proprietorship, if one of the owners should perish or become disabled, the business will automatically cease to exist.
* Liability- Works like a sole proprietor, both would be responsible should something occur.
* Income Taxes- Taxes are handled on a personal level for each partner
* Longevity/Continuity- if one of the partners perishes, the business no longer exists.
* Control- Each partner has equal rights in decision making
* Profit Retention- The profits from the partnership are divided as personal income
* Convenience/Burden- Like a sole proprietor, the financial burden is the responsibility of both partners with lack of convenience.
* Location- As long as both parties agree the business can be...

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