Category: Business Structure Options: Legal, Tax, and Risk Issues

13.1 Business Structures: Overview of Legal and Tax Considerations Being an entrepreneur carries with it the responsibility to make significant decisions, the first of which is to decide the business purpose: For example, who should benefit from the creation of the entity? The second important decision to make is whether you are going to be a…

Learning Objectives By the end of this section, you will be able to: Risk management is key to operating any business in a profitable fashion. There are many risks facing an entrepreneur when starting and operating a new business venture. The trick is to eliminate risks that will hurt the venture, while taking on risks…

Learning Objectives By the end of this section, you will be able to: In addition to the main entity selection topics already discussed, such as ownership structure and taxation, there are other considerations that entrepreneurs might want to consider. For example, when choosing a business format, a founder would be interested in how to raise…

Learning Objectives By the end of this section, you will be able to: A sole proprietorship is a business entity that is owned and managed by one individual and has very little formal structure and no mandatory filing/registration with the state. This type of business is very popular because it is easy and inexpensive to form. The…

Learning Objectives By the end of this section, you will be able to: A limited liability company is a hybrid of a corporation and a partnership that limits the owner’s liability. The big advantage that LLCs have over GPs is in the protection of owners from personal liability. Thus, an LLC is similar to a corporation in…

Learning Objectives By the end of this section, you will be able to: A partnership is a business entity formed by two or more individuals, or partners, each of whom contributes something such as capital, equipment, or skills. The partners then share profits and losses. A partnership can contract in its own name, take title to assets,…

Learning Objectives By the end of this section, you will be able to: A corporation is a complex business structure created by filing the appropriate documents with the state of incorporation (Figure 13.4). They are created when the original incorporators (owners) file a formal document called the articles of incorporation, or other similar documentation, with a state agency, often the…

Learning Objectives By the end of this section, you will be able to: The structure of a new business creates the legal, tax, and operational environment in which the business will function. In order to choose a business structure, entrepreneurs need to have a clear understanding of the type of business they seek to establish,…

Figure 13.1 Focusing time and energy on planning a business can help an entrepreneur avoid or minimize legal issues. (credit: modification of “hammer books law court lawyer” by “succo”/Pixabay, CC0) Chapter Outline 13.1 Business Structures: Overview of Legal and Tax Considerations 13.2 Corporations 13.3 Partnerships and Joint Ventures 13.4 Limited Liability Companies 13.5 Sole Proprietorships 13.6 Additional Considerations: Capital Acquisition, Business Domicile, and…