ABC/123 Version X 1 Business Forms Worksheet ETH/321 Version ✓ Solved

· Updated on December 8, 2025

There are seven forms of business: sole proprietorship, partnership, limited liability partnership, limited liability company (including the single member LLC), S Corporation, Franchise, and Corporation. 1. Select one of the forms of business 2. Research and provide three advantages and three disadvantages for this business form. 3. Provide a 100- to 200-word summary in which you provide an example business for each form. Discuss at least one of the advantages and one of the disadvantages of that form and potential legal forms that might be required. Business Form: Advantages 2. 3. Disadvantages 2. 3. Summary

Paper For Above instruction

Introduction

The landscape of business structures is diverse, each with unique legal, financial, and operational characteristics. Understanding the advantages and disadvantages of each form enables entrepreneurs and stakeholders to make informed decisions aligned with their strategic goals. This paper focuses on the sole proprietorship as a specific business form, providing a comprehensive analysis of its benefits and drawbacks, complemented by real-world examples to illustrate these points.

Sole Proprietorship: Advantages

  1. Ease of Formation: Establishing a sole proprietorship involves minimal legal formalities and costs. The owner can start operations simply by registering a business name if required, without needing complex paperwork or extensive licensing procedures (U.S. Small Business Administration, 2020).
  2. Complete Control: The owner has full authority over business decisions, enabling quick adjustments and personalized management without the need for consensus or approval from partners or shareholders (Baumol & Blinder, 2015).
  3. Tax Benefits: Profits are taxed directly as personal income, avoiding corporate taxes, and allowing for simpler tax reporting processes (Internal Revenue Service, 2021).

Sole Proprietorship: Disadvantages

  1. Unlimited Personal Liability: The owner is personally liable for all debts and legal actions against the business, risking personal assets in case of financial difficulties (Mancuso, 2018).
  2. Limited Capital Access: Raising funds can be challenging because sole proprietors rely primarily on personal resources or loans, limiting growth potential (Baumol & Blinder, 2015).
  3. Perceived Lack of Continuity: The business typically dissolves upon the owner’s death or decision to close, which can impact long-term planning and stability (Mancuso, 2018).

Example Business and Legal Considerations

An example of a sole proprietorship is a local freelance graphic design business operated by an individual. The owner benefits from full control over creative and scheduling decisions and reports income directly on their personal tax return. However, the owner assumes unlimited liability for client disputes or debts, which highlights one of the primary disadvantages. Legally, such a business might need to register a trade name or obtain a business license depending on local jurisdiction, but additional legal formalities are minimal.

Conclusion

Choosing the sole proprietorship as a business form presents advantages such as simplicity, control, and tax benefits. Nonetheless, it poses significant risks, particularly regarding liability and continuity. Entrepreneurs should carefully weigh these factors against their business goals and risk tolerance to select the most appropriate structure.

References

  • Baumol, W. J., & Blinder, A. S. (2015). Economics: Principles and Policy. Cengage Learning.
  • Internal Revenue Service. (2021). Tax Information for Small Businesses. https://www.irs.gov/businesses/small-businesses-self-employed
  • Mancuso, J. (2018). The Legal Guide for Starting & Running a Small Business. NOLO.
  • U.S. Small Business Administration. (2020). Choose Your Business Structure. https://www.sba.gov/business-guide/launch-your-business/choose-your-business-structure