BUS-105A session 2 case study

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School

Colorado Christian University *

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105A

Subject

Law

Date

Feb 20, 2024

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docx

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Uploaded by halleross566

Session 2: Case Study Sole Proprietorship Advantages Disadvantages Has complete decision making control over business Huge liability exposure for owner, can seize personal savings/property for debt 0 corporate tax can file with personal taxes Must register for EIN if wanting to bring second owner in Usually do not have to register with state first Difficult to raise money or get loans from bank Corporation Advantages Disadvantages Shareholders aren’t liable for any debt incurred Less privacy Can transfer ownership by buying/selling shares Double taxation Tax liability separation More paperwork and taxes to file LLC (Limited Liability Company) Advantages Disadvantages Owners of company have limited liability Costs more to form and maintain Flexible management structure Ownership is difficult to transfer Free transferability of financial interests Subject to self-employment tax I recommend that Ali chooses a sole proprietorship business ownership for her company. This is a simple, inexpensive, and quick way for Ali to build her business. A sole proprietor ship is a good choice for an entrepreneur like Ali that wants to kickstart their business. “A sole proprietorship allows small business owners to begin a business without taking formal legal action through the state. There's no need to form a board of directors” (Greene, 2023). A sole proprietorship would allow Ali to have full control and decision making over her business. It would also allow her to expand the business if it grows, and hire on more employees while still remaining in complete control. Sole proprietorship also involves less start up fees than starting and LLC or corporation. Sole proprietorship keeps tax filing to a minimum, allowing the owner to file business taxes to their own personal tax return with a 1040 form. “There is no limit to the number of people you can employ as a sole proprietor, and this allows you to grow your reach and your team without taking the leap to formally incorporating your business” (Bishop, 2021). This is extremely useful as Ali will be able to hir more full-time/part-time employees as her business grows. Starting off as a sole proprietorship would

Session 2: Case Study be beneficial for Ali’s website development business. If this doesn’t work, she can always re evaluate and re assess what business ownership type might work better for her company in the future.

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