ESSAY: Setting up a business

If you were to start your own business, which business entity structure would you choose?

Justify why your chosen structure is the best organizational form.

Explain the following business structures: sole proprietorship, partnership, LLC, and a corporation. In your analysis address the following for each business structure:

Steps to form

Personal liability for owners

Taxation

Advantages and disadvantages

Your paper must be three to five pages (excluding title and reference pages), and it must be formatted according to APA style as outlined in the Ashford Writing Center. You must cite at least two scholarly sources in addition to the course textbook. Cite your sources in-text and on the reference page.

I want to open a History Museum and I want to choose nonprofit or a LLC. Which one do you think is better?

LLC lets you take advantage of the benefits of both the corporation and partnership business structures.

LLCs protect you from personal liability in most instances, your personal assets — like your vehicle, house, and savings accounts — won’t be at risk in case your LLC faces bankruptcy or lawsuits.

Profits and losses can get passed through to your personal income without facing corporate taxes. However, members of an LLC are considered self-employed and must pay self-employment tax contributions towards Medicare and Social Security.

LLCs can have a limited life in many states. When a member joins or leaves an LLC, some states may require the LLC to be dissolved and re-formed with new membership — unless there’s already an agreement in place within the LLC for buying, selling, and transferring ownership.

LLCs can be a good choice for medium- or higher-risk businesses, owners with significant personal assets they want to be protected, and owners who want to pay a lower tax rate than they would with a corporation.

Nonprofit corporation

Nonprofit corporations are organized to do charity, education, religious, literary, or scientific work. Because their work benefits the public, nonprofits can receive tax-exempt status, meaning they don’t pay state or federal taxes income taxes on any profits it makes.

Nonprofits must file with the IRS to get tax exemption, a different process from registering with their state.

Nonprofit corporations need to follow organizational rules very similar to a regular C corp. They also need to follow special rules about what they do with any profits they earn. For example, they can’t distribute profits to members or political campaigns.

Nonprofits are often called 501(c)(3) corporations — a reference to the section of the Internal Revenue Code that is most commonly used to grant tax-exempt status.

ANSWER

Setting Up a Business

Introduction

Starting any business requires proper planning and understanding the legal requirements. Some common factors likely to affect the choice of the business structure include objectives for starting the business, capital availability, the scale of operations, management, government regulations, tax liability, and degree of control (Mancuso, 2016). For instance, sole proprietorship is the best option when a person wants to run the business alone and does not want to share income. However, there are other forms of businesses that require lengthy legal compliance and leaves the business owner with a decision of whether to form a limited liability company or a corporation. If I were to start a business, I would consider the highlighted factors before making an informed decision.

Business Structures

Sole proprietorship A sole proprietorship is a flexible form of business that does not have many legal requirements such as preparing books of account. As the sole trader, the business owner is entitled to make all business operation decisions. The proprietor has full control of the…