Choosing a Business Structure
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The paper examines the best business structure for a new business that will market a new heart stent that must still go through the FDA approval process for new medical devices. The paper explores the three basic business structures from which the owner can choose, that are the sole proprietorship, partnership and corporation, and explains why the corporation is the only reasonable course of action here. The paper addresses the elements of risk, raising capital and taxation and shows how on all major metrics of income tax, risk protection and raising capital, the corporation structure is superior.
Summary of Issues
Five Year Plan
Summary of Issues
Five Year Plan
From the Paper:"There are two major issues that Jack needs to consider with respect to the decision about business structure. The first of these is the risk that he faces. The three different business structures vary considerably in their approach to risk. The sole proprietorship places all of the risk on the proprietor. The partnership places the risk on the different partners. The corporation places the risk on the corporation. The principles and financiers, Jack included, are not subject to risk with respect to their personal assets. In the first two forms, Jack's personal assets would be subject to the same risk as the business assets, because there would not be any legal difference between them. Only the corporate form provides this protection of personal assets from debts incurred by the company.
"The second key issue is with respect to raising capital. In a sole proprietorship, Jack would own the entire company. This would limit his ability to raise capital. In particular, Jack would be unable to raise equity capital. He would be able to take on debt, but his ability to do so would be severely limited. The amount of debt he could take on would be bound by his personal capacity for debt, which may already be constrained."
Sample of Sources Used:
- IRS.gov. (2010). Sole proprietorships. Internal Revenue Service. Retrieved October 12, 2010 from http://www.irs.gov/businesses/small/article/0,,id=98202,00.html
- Nolo.com. (2010). Sole proprietorship basics. Nolo.com. Retrieved October 12, 2010 from http://www.nolo.com/legal-encyclopedia/article-29694.html
- IRS.gov, 2 (2010). Partnerships. Internal Revenue Service. Retrieved October 12, 2010 from http://www.irs.gov/businesses/small/article/0,,id=98214,00.html
- IRS.gov, 3 (2010). S-corporations. Internal Revenue Service. Retrieved October 12, 2010 from http://www.irs.gov/businesses/small/article/0,,id=98263,00.html
- Springer, S. (2010). Types of partnerships. FindLaw.com. Retrieved October 12, 2010 from http://smallbusiness.findlaw.com/business-structures/partnership/partnerships-types.html
Cite this Business Plan:
Choosing a Business Structure (2013, April 30) Retrieved January 20, 2021, from https://www.academon.com/business-plan/choosing-a-business-structure-152871/
"Choosing a Business Structure" 30 April 2013. Web. 20 January. 2021. <https://www.academon.com/business-plan/choosing-a-business-structure-152871/>