This paper will evaluate the advantages or disadvantages of each business type with the business issues facing. It will discuss the management decision to make concerning which legal form of business that will facilitate my firm to succeed. Key words: Management decision, advantages, disadvantages, legal form of business. My business Type Decision for a Successful Company My invention of a new home appliance was a great idea. In fact, it is easier and safer to use than the old appliance products on the market. It will satisfy consumers.
And, it will be appropriate in a wide variety of other products. So, my plan to start a plant to produce my new product will cost a lot of money. My lack of personal fund, not having enough financial, and any management skills, determine what legal form of business to choose to operate this future company in order to be able to deal with current issues. This research will evaluate the advantages and disadvantages of each legal type. Afterward, it will help me to make my decision upon the legal structure of business to run the firm. Advantages and Disadvantages of the Three Legal Forms of BusinessAccording to Ebert & Griffin (2005), some advantages and disadvantages are found in find each business structure. And, anyone who desires to own a business should evaluate each type of business.
Then, he/she can decide the one that will contribute to the business success. An analysis of the three basic legal business forms to discover their advantages and disadvantages will surely help to make a better management decision. The sole proprietorship is the first I am going to analyze.
The sole proprietorship puts forward advantages and disadvantages to consider.The sole proprietorship presents some good factors. The New World Finance and Investment Dictionary (2003) define the sole proprietorship as a simple structure which is not incorporated, without any need of a lot of fund to start. That gives the opportunity to be your own boss with a lack of management skill. And, all the profits will be yours. This simple organization structure would help someone with a little financial skill.
However, this structure is not always beneficial. Some factors are not advantageous in the sole proprietorship.Ebert & Griffin (2005) make clear that all debts of the company are personally the owner’s responsibility. A lack of financial skill will result somehow in disastrous individual decision making if large debts occur; in addition, they affirm that this structure doesn’t help enough in having a loan that could start a high start-up cost business. These factors don’t give confidence to start a large company. Will the next legal type solve these problems? The Partnership type presents also advantages and disadvantages to evaluate. The partnership presents some advantages to open a business.
According to Merriam (2005), the partnership is a “… association of two or more persons or entities that conduct a business for profit as co-owners. ” The inability to run personally a company will definitely encourage someone to have another partner or more to help. According to Ebert & Griffin (2005), this type of business facilitates to borrow money, in contrast to the sole proprietorship that makes it very difficult; there is also a growth potential for a company in this kind of structure; in addition, each partner will share the taxes, not only one person.At some point, the partnership can help resolve a limited financial issue, if an owner is going to start up an average business.
But, this structure has some dilemmas also. Some factors of the partnership are not advantageous. According to Ebert & Griffin (2005), the liability is unlimited.
So, the responsibility of all the debts will fall on each partner. Then, that is a big issue to consider before opening a big business, if the partners don’t have enough financial skill. In addition, it is not easy to transfer ownership. If a partner is dead the business can easily dissolve, according to Wiley (2005).He clarifies also that this type provides “limited liability to raise large sums of money. ” It would be better to have a legal structure that would avoid these inconveniences when opening a large business. Can the next legal type of business solve these issues? The Corporation type proposes advantages and disadvantages to evaluate.
The corporate form contains its advantages. The Dictionary of Finance and Investment Terms (2006) describes the corporation as a “legal entity, chartered by a U. S.
state or by the federal government, and separate and distinct from the persons who own it… t is regarded by the courts as an artificial person; it may own property, incur debts, sue, or be sued…” The same dictionary summarizes also some advantages of the corporate form. It offers a limited liability. The owners can only lose their own assets. It can also transfer ownership through the sales of the shares of stock. If an owner dies, the company will not need to dissolve.
This form provides the opportunity to gain capital through expanded ownership, and to facilitate investors to earn more income from the growth of the firm. This legal form gives some advantages, but also some disadvantages.Ebert & Griffin (2005) outline three disadvantages to operate a corporation form of business. First, the corporation requires a high cost, or a lot of fund, to put in place a plant. The sole proprietorship and the partnership don’t require that much money. Second, The Corporation is organized with a lot more regulations. Third, they impose a double taxation on this type of business. The profit will be taxed twice, at the business level and again on profits earned by the shareholders.
These inconveniences could affect a management decision to run a business.My Management Decision for the Success of my Company. The evaluation of the advantages and disadvantages of each basic type of business helps a lot to choose the corporation as the right legal form in order to run the new home appliance company. First, this choice could solve the financial issue. To start up and to expand a plant built for a new home appliance, it will necessitate a very large sum of money that only the corporate form can offer. So, its high start-up cost disadvantage will not affect seriously the business. The sole proprietorship and the partnership will not allow raising enough funds, as the demand will eventually increase.
Secondly, this decision could solve my management issue. With no have no idea how to manage such big enterprise, the corporation choice will provide complete responsibility to competent managers. The sole proprietorship and the partnership don’t provide this opportunity that is so crucial for the home appliance plant to start and grow.
In summary, the good and bad factors of each type of business evaluated above help to finally choose the corporation as the legal form to run the firm. The sole proprietorship and the partnership provide advantages respectively for small and regular businesses.But they will not help enough with my project to open a high start-up cost business. I will only have to make sure that I have good managers who will be able to control the risks and help the company to meet the consumer’s need.ReferencesEbert, R.
J. , & Griffin, R. W. (2005). Business Essentials.
Upper Saddle River, NJ: Pears Prentice Hall. Retrieved November 11, 2010 from https://mycampus. aiu-online.
com/Classroom/Pages/CoursePlayer. aspx? classid=437652&tid=187&un=1&HeaderText=Course Materials: BUSN105-1005A-79 : Introduction to Business Corporation. (2006).Dictionary of Finance and Investment Terms. Retrieved November 10,2010 from http://www.
credoreference. com/entry/barronsfin/corporation Forms of Business Organization. (1995). In Dictionary of Economics, Wiley. Retrieved from http://www. credoreference. com/entry/wileyecon/forms_of_business_organization) Partnership. (2005) Merriam-Webster’s Dictionary of Law.
Retrieved November 11, 20010 from http://wf2dnvr1. webfeat. org) Sole Proprietorship.
(2003). New World Finance and Investment Dictionary. Retrieved November 10, 2010 from http://www. credoreference. com/entry/wileynwfid/sole_proprietorshipAccording