Types And Disadvantages Of The Four Forms Of Business Organizations

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There are four major forms of business organizations, each having advantages and disadvantages. The first form of business organization is sole proprietorship. Sole proprietorship is when one person runs the entire business and will receive all profits retaining to that company. An advantage of being a sole proprietor is having all the control over the design of the company being created. There are minimal legal procedures needed, which makes the creation process easy. Also, the sole proprietor is allowed to keep all his/her profits made. Unfortunately there are some disadvantages when it comes to sole proprietorship. Funding is limited to your own personal money, or any loans you are able to obtain regarding this business. Another disadvantage …show more content…
The third major form of business organization is corporation. Corporation is a legal existence where they fund the owner’s money and are paid back by obtaining stock in the company. The advantages of using corporation are the shareholders are responsible to claim all profits on their taxes, not the owners, it is very easy to gain financial assets by selling more stocks, and some liability is on the shareholders. Some disadvantages of corporation are the corporate income is taxed two times, and the creation and design of the company will require protocols. The fourth and final major form of businesses organization is limited liability company (LLC). Limited Liability Company is a business that takes the advantages of both partnership and corporation together making a new form of business organization. The losses are deducted from the taxes and their executive flexibility that is found in a partnership and the minimal liability that falls on the stockholders that occurs in a corporation. The LLC have many advantages including; the IRS treats it like it is a partnership or sole proprietorship, the owners can obtain limited liability and still have a say in their company, and the profit and losses are only taxed on a personal …show more content…
Corporation would have been preferred by Jeb and Josh, because they could have gone to a group of investors who could have funded their company. Then when Jeb’s wind farms were shut down and caused him to go bankrupt, it would not have affected his ability to give personal funds for their joint company. Also, if Jeb and Josh needed any more money, it would have been easy to raise it by getting more stockholders. Another reason they should use this type of business organization is that when the women was hurt on their whitewater rafting excursion, they both would not have been responsible for Jane’s injuries. Jeb and Josh could also have used a limited liability company because it also limits their liability when it involves a business debt. However, they do not have to divide their profits and losses according to the owner’s involvement. Most likely, where Jane was hurt, they will obtain a loss for her pain and injuries. Both Josh and Jeb would have limited liabilities, yet still be allowed to have a say in the company’s management. Their business would be covered in all states that their company operates in without filing in each state separately. Finally, their profits and losses are reported on their personal tax returns, yet they do not have to be reported on the corporation’s. This means that they are not getting taxed twice. I feel that Jeb and Josh major

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