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Posted: August 1st, 2022
the Prompt: Describe the differences between sole proprietorships, partnerships, limited partnerships, corporations, and limited liability companies. When are each of these entities advantageous to a business owner, and under what circumstances could they prove problematic? 1.Prepare an executive summary of your position, paying particular attention to the creation of a thesis statement that signals to your reader the argument the remainder of your paper will be substantiating.
2. In the body of your paper, fully address the questions presented, including the insertion of citations to research beyond your textbook. Include 5 or more references to outside sources.
3. End with a conclusion that summarizes your entire paper, explaining why your paper has successfully substantiated your thesis statement.
4. Demonstrate appropriate APA formatting including a cover page, in-text citations, and a works cited page
There are a number of business models to choose from when venturing into business. Having the right model enables the entrepreneur, or existent business to decide on its partners and modes of capital. For investors, they also consider the business model based on its pros and cons. Some models offer limited liability while others offer full liability on the individuals involved. For the owner of the business, it is easier to come up with a plan once the model has been established. It is important to choose a business model through consideration of its partnerships and liabilities so that one is well aware of the control they have over making decisions alongside the consequences that may follow.
A sole proprietorship is a business whereby an individual is hold the responsibility of the company and is in charge on their own unlike in other business types where other individuals share power. A business owner is advantaged by a sole proprietorship when it comes to decision making (Wallace, 2018). This kind of business allows the owner to have complete control over how the business operates which makes thing easier. However, the downside of this model is that the owners are fully liable for their finances unlike in LLC’s where the financial liabilities lie within the company and not the individuals in charge.
Other models of business include general partnerships and limited partnerships. Partnerships are the most common ways to get into business for individuals who are more than one. The advantage of partnerships is that they all require less paperwork and operate with little bureaucracy (Zandri, 2016). However, for the general partnership, even though it is advantageous due to combination of ownership and control, it may not be a good idea for investors since the partners’ personal assets are prone to liability (Korchak, 2017). LLC’s, limited partnerships, and Corporation models offer protection against liability, which makes them attractive to investors. Hence, limited partnerships could be the answer to this problem. Even though they have more responsibility in terms of security laws compliance, they only risk their investments.
When it comes to mature businesses, corporations and LLC’s are models that are highly considered. This is because they all protect the individuals of the businesses from liability. LLC’s protect the individuals unless in the case of fraud or failing to meet LLC requirement (Treece, 2018). Corporations protect the shareholders and ensures that they are only liable up to the amount of their investments without touching their personal assets. However, if the shareholders are many, the management team may take over without consideration of the owners. Unlike LLC’s, corporations are plagued with double taxation and excessive tax filling (Bragg, 2018). For LLC’s, management stays within the owners as it is easy to create and administer. Having an LLC model seems easier to manage unless the company wants to go public.
In conclusion, it seems that there are models with liabilities such as sole proprietorships, and general partnerships while there are those that protect the individuals from liability such as corporations, limited partnerships and LLC’s. As much as every business person would want to be protected from liability, corporations and LLC’s are only affordable to mature businesses. Entreprenerurs are left out to choose from the rest, of which limited partnerships offer the best approach. Understanding one’s business can help them choose the right model that will help them plan out the course their company is meant to take. Not only are models important to owners, but to investors as well.
Bragg, S. (2018). Corporation advantages and disadvantages. Retrieved 31 July 2019, from https://www.accountingtools.com/articles/corporation-advantages-and-disadvantages.html
Korchak, J. (2017). Advantages and disadvantages of a partnership business – Inform Direct. Retrieved 31 July 2019, from https://www.informdirect.co.uk/business-management/partnership-business-advantages-and-disadvantages/
Treece, D. (2018). 5 Pros and 5 Cons of an LLC. Retrieved 31 July 2019, from https://fitsmallbusiness.com/pros-and-cons-of-an-llc/
Wallace, L. (2018). Advantages and Disadvantages of Sole Proprietorships. Retrieved 31 July 2019, from https://www.legalmatch.com/law-library/article/advantages-and-disadvantages-of-sole-proprietorships.html
Zandri, P. (2016). The Pros and Cons Of Limited Partnerships For Entrepreneurs. Retrieved 31 July 2019, from http://business-superstar.com/super-tools/the-pros-and-cons-of-limited-partnerships-for-entrepreneurs/
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