Discussion:
One of the first steps in making entrepreneurial business opportunities a reality is deciding what form the business will take.
Create a 500- to 700-word paper on the various forms of business organization.
Define each of the following forms and address the advantages and disadvantages of each:
• Sole proprietorships
• Partnerships
• Corporations
• Limited liability companies
Response the following question and explain your answer:
• What is the most appropriate form of ownership for an aggressive entrepreneurial firm?
Cite at least two scholarly sources.
You should Format your paper consistent with APA guidelines.
Entrepreneurial Business Opportunities
Entrepreneurs identify all types of opportunities in society to create profitable businesses. Once the opportunity is identified the entrepreneur will establish a business to support the opportunity and to ensure the business thrives. Every business will take on a different structure. The first step once for the entrepreneur is to decide what form the business organization will take. There are several potential choices the entrepreneur can select depending on the business and the opportunity. This includes sole proprietorships, partnerships, corporations, and limited liability companies.
The sole proprietor is when a person owns a business solely. This means that they do not have any partners and all the profits made from the business are theirs but this also means all debt is theirs. These types of businesses are generally smaller mom and pop type establishments but some larger businesses can also be sole proprietors. The partnership is the business that has more than one owner. This means two entrepreneurs go into business together or one entrepreneur takes on an additional partner in this business. In this case all partners would be legally responsible for the company and its debt but will share in all of the profits.
The corporation is a larger business with shares of stock. In other words instead of a partner or two owning the business it sells stocks and is owned by the shareholder. The corporation consists of a board of stockholders that make important decisions. The Limited Liability Corporation (LLC) is a corporation where the owners have limited liability and instead the corporation itself is liable. In the LLC and corporation, liability of the owner is limited to the owner's investment (SBA, 2014). All profits and all losses are counted against the corporation instead of the owners of the corporation. If the business fails owners have limited liability.
The sole proprietor will ensure the owner is responsible for taking on all debt the business accumulates but this approach takes less time.
The owner has complete managerial control and reaps the benefits of all profits made. The more aggressive approach would be to avoid legal liability and select the LLC. A new aggressive venture, likely will be taking risks that an established firm would not take (Pullman, 2011). In other words the LLC allows the entrepreneur to take risks that may not be possible for the sole proprietor or the corporation. The sole proprietor cannot be aggressive because if the business fails they are responsible for the debt which could affect their personal life.
The Limited Liability Corporation limits the risk to the entrepreneur allowing then to jump into a business quickly and to limit personal losses.
The entrepreneur that cannot afford the personal risk of starting a business can potentially taking a financial loss if the start a sole proprietorship but if they start a LLC that later fails then the loss is limited. This allows the entrepreneur the ability to take a risk and start a business that could be a success or that could fail. The form of business selected by the entrepreneur could determine whether or not the business is likely to be a success.
References
Pullman, J. (2011). How You Structure A New Entrepreneurial Business Matters. Retrieved November 16, 2014 from
https://www.streetarticles.com/entrepreneurialism/how-you-
structure-a-new-entrepreneurial-business-matters
Small Business Association. (2014). Limited Liability Company. Retrieved November 16, 2014 from
https://www.sba.gov/content/limited-liability-company-llc