Essay Business Formation Of The American Dream

925 Words 4 Pages
For many people, the American dream is to be their own boss. Many businesses started from this dream, from a simple one-man electrician to multinational corporations. All of these businesses had to make a decision very early in the formation of their business; what type of entity will this company be. While this may seem like a simple question at first, one must consider the ramifications, tax issues, and accounting requirements for each of the four business entities; a sole proprietorship, partnership, corporation, and limited liability company (LLC).
The most basic of these four business entities is the sole proprietorship, which is an entity that has only one owner. This type of business formation is best suited for small businesses such as small trade shops such as electricians and plumbers. A sole proprietorship is also the easiest for tax and accounting purposes as the sole proprietorship is also considered to be of the same legal entity as the owner. While the ease of this type of business structure is a positive for some, there are some issues that an owner of a sole proprietorship must be aware. They have unlimited liability for issues that arise in the course of business which means that their personal assets are tied into the business such as personal real estate. Also, raising capital for the business is limited to the owner’s assets and capacity to borrow funds as they cannot sell a stake in the company.
Many companies are started by more than one person. A…

Related Documents