Business Structure Advice - Case Study Example

The sole proprietorship is one of the business structures that Mr. John can opt for. If the owner aims at becoming a sole proprietor he just needs to start a business and does not need much paperwork. In such a business there are no partners and all the decision making authority lies in the hands of the single owner of the business (Parrino, 2012). He makes important business decisions regarding what to produce, where to sell the goods and services and for whom to produce. Another benefit of this form of business is that the owner retains all the profits from the business (Nytimes.com, 2012).

But at the same time the owner is entitled to unlimited liability which means that in case if the business goes bankrupt, he/she is responsible for paying all the debts and in order to pay the debts the owner may even lose all the money he has invested in the business along with property and assets owned by the owner. In case of running this form of business, the owner has to pay for all the taxes that are associated with the business and these taxes are filed as the personal income tax of the business owner (Sba.gov, 2014).

The second form of business is a partnership in which more than one individual join hands together to start a business and the profit and the decision making authority is divided amongst the business owners (Parrino, 2012). The benefit of this form of business is that the business can raise more funds that may be contributed by the partners. The disadvantage of this form of business is that all the owners experience unlimited liability. This means that in case of bankruptcy, they will lose all their money to repay the debts (Miller, 2008).

Similar to a sole proprietorship, the taxes paid in this form of businesses are paid by the owners of the business in a relation of the percentage of their share of profit from the business (Sba.gov, 2014). The third form of business is the company in which the business itself is recognized as an entity irrespective of the number of owners of the business (Parrino, 2012). The business may comprise of several owners and the people managing the business may not be shareholders or owners of the business.

The benefit of this form of business is that it can raise a huge amount of capital since various shareholders are involved and can grow in size and expand. The profit is shared between the shareholders of the business and the owners experience limited liability. This means that the amount that they have invested in the business will only be lost to repay the debts in case of bankruptcy. The taxes are not levied on individual owners of the business and the business is recognized as a separate taxable identity which pays taxes through its revenues and incomes (Sba.gov, 2014).

Conclusion If Mr. John wants to keep all the profits and the decision making authority to himself, he should go for the sole proprietorship. If Mr. John wants to run a larger business and does not have enough funds, then he can opt for a partnership. If Mr. John wants to create a huge business with expanded operations then he should form a Company or Corporation.