Tilly's Small Business Case Study

Improved Essays
God calls us to seek wisdom, knowledge and understanding and to follow where He leads, so as Tilly considers starting her new business, I believe that it is critical that she seek wisdom and knowledge in order to decide how to structure her new business. Proverbs 19:20-21 says, “Listen to advice and accept instruction, that you may gain wisdom in the future. Many are the plans in the mind of a man, but it is the purpose of the LORD that will stand” (Proverbs 19:20-21, NIV). It is my goal to provide wise counsel to Tilly on the three possible business structures that she could adopt as a new business owner and the pros and cons associated with each. She has an option to start her business as a sole proprietorship, as a partnership or as a corporation, …show more content…
A sole proprietorship is a business in which the business has no legal existence separate from its owner (Entrepreneur, n.d., para. 1). In this form, Tilly would maintain all managerial control of the business and would only have single taxation. In order to obtain the necessary capital to start her business, she would have to pursue a small business loan through a bank or through the U.S. Small Business Administration. However, as a sole proprietor, Tilly would be personally liable for all of the debts of the business and any lawsuits that may come about. Joshua Levenson, who writes for NOLO says, “This means that if your business doesn 't pay a supplier, defaults on a debt, or loses a lawsuit, the creditor can legally come after your house or other possessions” (Levenson, n.d., para. 4). Because Tilly is averse to taking on this liability, I would suggest that this structure will not best serve her business …show more content…
As a corporation, Tilly’s business would be a separate legal entity, which exists separate from her personal interests. Thus, this business form would give her the most liability protection from corporate debts and obligations. It also provides the advantages of unlimited life, transferability of shares and the ability to raise capital. However, by setting up as a corporation, Tilly would incur more initial costs in registering the corporation and would require her to complete more administrative tasks such as filing annual reports, which also will cost the company. In a corporation, there is also a separation of ownership and control as there are several shareholders, the board of directors and officers who can determine the direction of the business. Another drawback of incorporating is acquiring more tax liability since the company will now be taxed separately (Khwaja, n.d.). This business form would be ideal of Tilly planned to go public and grow at a large rate. Due to her current size and financial state, I believe that it would be best that she not incorporate immediately. Instead, it will be wise to keep her company closely held, where she can execute her mission and vision for the organization and see it

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