DQ 2. From your readings, differentiate between two legal forms of doing business. Discuss their differences and the benefits and liabilities between the two. Provide an example business. What would be the preferred form of business, and why?
Sole proprietorship and corporation are two different forms of the several legal forms of conducting business. Sole proprietorship is a single person owning a business and the owner is the decision-maker with total control. Because it is the simplest form of starting ...view middle of the document...
Sole proprietorship and the owner are considered as one entity therefore the owner is legally responsible for business contracts and torts.
A corporation is different because formation it is more complex and it is created to statutory requirement of the State of incorporation. The owner or owners are regarded as shareholders therefore the business responsibilities and liabilities are separated from the owner. Other benefits and differences are: -If one owner/shareholder leaves, the corporation still can continue and function. -Corporation can set aside extra profits without taxation consequences. -Aside from taking the same tax deductions as sole proprietorship, corporations can take special deductions.
In the case of an individual who lost his job with a landscaping company and decides to start up a lawn care business on his own. It would be better for this prospective business owner to use a sole proprietorship form of business. This type of business usually requires a low cost to start. The individual is a single owner, has a small amount of start-up cash, and it will be difficult to borrow money to start or expand the business.