Legals Forms of Business - Term Paper Example

In addition, it is less costly and easier to establish a sole proprietorship than any other form of business as it requires a few legal formalities. This form of business is a good undertaking as it allows flexibility than a corporation and partnership. The sole proprietor has discretion to make an instant decision. For example, he can make decisions on when to take a vacation, whom to hire and the business worth pursuing. The sole proprietor can also transfer or sell some portion of the business to another person without seeking approval from any other person.

A sole proprietor is allowed to establish a retirement account that is exempted from tax only when funds are not withdrawn. Lastly, a sole proprietor only pays personal income taxes from the profit gained (Miller & Cross, 2013). Partnership Partnerships are businesses established by two or more than two persons with an aim of making profits. Partnerships are established through agreements among the partners, which can be implied or expressed. The partners become the co-owners of the business and they jointly operate and share profit equally.

Partnerships are regulated by the statutory laws and the Common laws. Partnerships are preferred because of several reasons. . The partner, who performs additional administrative duties such as managing personnel or the office, receives a salary in additional to the share of the profit he gets. The partners have full access to information that concerns the carrying out of all aspects of a partnership business. The partners are free to inspect all the records and books of account on demand and get copies of the materials.

Members of a partnership can determine the value each owns in a partnership. This can be done by carrying out of accounting either through a court order or voluntarily. Lastly, in a partnership, a partner may possess partnership property on behalf of the entire partnership but has no right to mortgage, sell or transfer partnership property to another person (Miller & Cross, 2013). Limited Liability Partnership (LLP) This is a form of business designed for largely for professionals such as accountants and attorneys who are involved in business as partners in a partnership.

This form of business is advocated for because of various advantages. To begin with, it limits partners' personal liability as it allows the partnership to continue existing as a pass-through entity for taxes related issues. This form of partnership facilitates the conversion of traditional partnership into a LLP because it shares similar basic organizational structure with the traditional partnership. The LLP protects professionals from personal liability emerging from the malpractices done by associated partners such as negligence, wrongful acts or misconduct (Miller & Cross, 2013).

Limited Liability Company (LLC) A limited Liability company (LLC) is a form of business that allows partnership-style of taxation and gives its owners limited