Fin/571 Business Structures Essay

742 Words Jul 27th, 2013 3 Pages
Business Structures
Donna L. Fudge
FIN/571 Foundations of Corporate Finance
Helen Brown-Horton
July 15, 2013

Business Structures There are three types of business structures sole proprietorship, partnership, and general. Each business structure has its advantages as well as disadvantages; the key is determining which business structure will be most suitable for your business venture. Not everyone is looking to run a small business so a sole proprietorship may not be the answer, it could be that you are looking to start small and have your company grow into a corporation but not quite function exactly like a huge corporation. Whatever the case one must determine which business structure best suits their needs and this paper will
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A general partnership can be as simple as a written agreement between two or more people while a limited partnership limits personal liability of each partner to their capital investment”. It is important in this type of business structure to hire an outside party such as an attorney to draw up the legal documents that will dictate each partner’s role, responsibility, and liability. Again in everything there are pros and cons. The pros to a partnership is that obtaining a partner is easy, when there is more than one owner this increases financial stability allowing each partner to contribute funds and potentially increase their borrowing capacity. Depending on the business and its need for additional partners this could increase employee retention because employees will see an opportunity to one day be a partner. On the downside, each partner is liable for the faults or actions of other partners, profits must be shared and because decisions are shared as well this increases the chances of disagreements. You want to make sure that the person you are in business with sees the same future for the business that you see to avoid any problems down the line. Because you have to remember you have a partner and you can’t make decisions by yourself.
Corporation
Corporations are huge and more complex than sole proprietorships or partnerships. Corporations are made

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