Week 1 Practice: Business Structures

Mind Map is here.

The purpose of the assignment was to learn the different types of business models. This is important because we need to know what our options are when we set up our business plan. Most of us will probably be looking at Sole Proprietorship or Partnerships because they are simpler models and are easier to to going for start ups. 

• Sole Proprietorship
• Has only one owner and is often run by that individual. There is little distinction between the owner and the business.
• Pros: Simplicity in startup, makes taxes easier, and no contracts to worry about with partners.
• Cons: One person has all the liability, not much room for expansion, may seem less legitimate without the formal business structure.
• 3 Real World Business Examples
• Landscaper
• Home Healthcare
• Tutoring

• Partnerships
• Two or more people equally sharing a business. All parties are equally responsible and liable.
• Pros: The responsibilities start up, liability, risks and expenses are all shares. Easier to expand later.
• Cons:  Partnerships are hard on friendships, share liability means picking up someone’s weight if they drop it, shared profits, and shared control of the business’s future.
• 3 Real World Business Examples
• Google
• Apple
• Ben and Jerry

• Corporations
• A company that is its own entity or legally a person. The company is separate from the owners or stockholder. 
• Pros: Owners have limited liability because the corporation is its own entity, It’s easier to attract investors, you can offer stock options to employees.
• Cons: It is time consuming to become incorporated, then there are a lot of formalities required to meet the requirements or a corporation, and taxes are more complicated and may actually be higher because the corporation itself can be taxed.
• 3 Real World Business Examples
• Starbucks
• Target
• Wal-Mart

• S Corporations
• A corporation with less than 100 shareholders that has elected to pass all tax liabilities to the shareholders. This keeps the company itself from any tax responsibilities.
• Pros: Protects that assets of shareholders from debt collectors going after the company, the company does not get taxed, and gives potential investors confidence in the business.
• Cons: As expensive and time consuming as a corporation with upkeep fees, limits types of stock and number of shareholders, and the IRS gives greater scrutiny to filings.
• 3 Real World Business Examples
• Real Estate agents
• Attorneys
• Contraction Contractors.