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Business Legal Structures - Essay Example

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Business Legal Structures There are various forms of business settings all over the world, but all observe the universal objective of business of profit maximization. The most common type of small and medium scale forms of business include sole proprietorship, partnerships, and limited liability corporations, a fact attributed to their relatively low capital requirement for initial formation compared to the other large scale forms of businesses, as well as the liabilities and legal requirements associated with them (Sullivan)…
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Business Legal Structures
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Download file to see previous pages The owner of the business is usually the person who runs the day-to-day activities and responsibilities of the business (Kuratko & Hodgetts 190). Accordingly, that one individual also owns all properties and assets of the business, and all the profits realized from the business operations. As such, these individuals are also responsible for all the debts or liabilities, as the law and the public views that individual as the same entity with the business (Miller & Jentz 530). Although it is looked upon as a business easy to run with several advantages, it has a number of disadvantages as well. The merits of sole proprietorship are that it is the least expensive type of business in both formation and organization, and the proprietor has total control over the business, thus allows business decision making according to their appropriation by the business law parameters (Miller & Hollowell 385). In addition, the owners receive all the profits from the business, no additional taxation, no business reporting to government agencies, and easy dissolution if so desired. Further, the owner of the business only has to secure the few legal requirements like tax identification number, necessary licenses, and certificates to start business operations. It is only this form of business operation where decision making is fast. This is because the owner does not need to make consultations as it is the case with other forms of business managements. The most significant demerit of sole proprietorship is that the proprietor has unlimited liability, and thus legally responsibility for all liabilities or debts of the business. Other disadvantages include the difficulty of selling or transferring part or all of the business resulting from the tax consequences associated with converting this from of business to a corporation or company (Miller & Jentz 532). In addition, the proprietor lacks financial support as enjoyed by other forms of legal structures, and the business risks failure on the incapacitation of the proprietor as all management responsibilities lies upon them. Again, the business has difficulties in attracting high-caliber employees, as well as deducting some employee benefits like medical insurance. If it happens that the business in its operation incurs a loss, the proprietor suffers it alone, with no one to share the liability with. Partnership The second form of business is partnership. A partnership is a form of business where ownership lays between two or more people. Similar to sole proprietorship, the laws does not recognize business partnerships as different entities from their owners (Laro & Pratt 88). There are, however, limited liabilities partnerships where the liability of the partner is limited to their share of investment in the business, though there must be at least one partner who remains liable (unlimited) for the debts of the business (Kuratko & Hodgetts 192). Nonetheless, the partners is required to have a legal agreement that stipulates how decisions concerning the business will be made, profit sharing, resolutions of disputes, admission of future ...Download file to see next pagesRead More
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