Forms of Business - Research Paper Example

Tinker & Tailor’s Home Security Service. (LP) In this form, the limitation of liability is provided to the limited partners, i.e. those not actively participating in business activities while others have the unlimited personal liability. Tinker & Tailor’s Home Security Service, Inc. (corporation) Corporations provide limited liability to the owners of the business thus protecting from being personally liable. Tinker & Tailor’s Home Security Service, LLC. (LLC) The owners or members are not personally liable in this form of business.

The personal liability may not be limited in sole proprietorship as well as the general partnership forms of business. But in case of general partnership, it may be made limited by registering the establishment as a limited liability partnership that provides safeguard from being personally liable in case of negligence of other partners but does not provides protection from debts or breach of contracts lawsuits. However, if a partner is not being actively involved in the business, he/she may also limit their liability by registering the establishment as limited partnership that offers limitations on the liability of non active members of the partnership.

In case of Corporation as well as Limited liability corporations there is no need to change the business form in order to limit one’s liability as these business forms provide limited liability to the owners. In case of corporations, the liability is limited on the basis that ‘corporations’ are legally considered to be a separate entity from their owners and hence all the liabilities regarding business are dealt and managed by corporate assets only. b. I am engaged in a book selling business and run my business using a sole proprietorship form of business.

My business is solely based on my own money hence it is solely owned by me. I tried to operate it as a partnership but was unable to find an appropriate partner so I decided to invest my own finances and start business. My book stall provides new as well used books. The books are either purchased from the suppliers but in case of used books, they are often donated by my class mates, friends, relatives and neighbors. Since being a small store it was not easy to expand it in the initial stage thus being the fundamental business form, sole proprietorship was adopted by me.

If somehow any other individual may show interest in sharing my business, I may ensure that the business is expanded from a book stall to a book store. Since being a part time worker, it'll enable the stall to be operative full time. All of the partners share equal authority; therefore, I’ll ensure that my potential partner invests in an equal amount of money in the business. Although this form of business does not offers limited liability and each of us in case of any debt or breach of contract will be equally personally liable to the losses.

Besides the significant risk offered by this form of business of personal liability, it enables the management of the business affairs by each partner. Moreover, it also protects from the disbursement of business earnings in the form of taxes, as the partners in a partnership are not employees. However each of the partners has to pay taxes from his/her share of profits share (income or loss) admitted on income tax return of each of the partners and levied a tax at corporate or at the personal rate.

The main aspect of this form of business is the ease of formation and it may also be converted into limited liability partnership in case if the unlimited liability is desired to be avoided in case of other