Week 4 Business Structure

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1 Business Structure Sherika Harris The University of Arizona Global Campus BUS311: Business Law I Maureen Martinous Oct. 3, 2022

2 Business Structure In business, there are many variables that may come into play. For a business to be successful the first step is to know which path of structure one is willing to accept. By this, finding which organization will help benefit you, your employee (if any), and most of all your company. “Business structure affects how much you pay in taxes, how to raise money, and protects your personal liability.” (This paper will discuss my business structure, how to evaluate entities and the advantages and disadvantages of the business entities. Sherika’s Custom Designs LLC. What’s in a business name? Motivation, popularity, or signature. All the above, a business name can represent who and what your business has to offer. In Sherika’s Custom Designs, there are so many custom design items that can be personalized. Choosing a structure will be the first item on the checklist. According to Roger, 2012, “the better you know about different participants in the business, the more knowledge you will have of the legal consequences of being a sole proprietorship, a partnership, a limited partnership, a corporation, or an LLC.” Structuring your business can either make or break your company’s potential. Sole proprietorship gives the owner full control over the business, as stated in Rogers, 2012, “this is the simplest form of a business organization.” A partnership has two or more co- owners, this means that both partners must have contractual capacity. Both partners can be the principal and the agent, also, the partnership must carry on business. Limited partnership (LP) like general partnerships, must have two or more individuals signing an agreement to enter the business as joint owners. A corporation is more the larger entity and is legal in the eyes of the law. According to Rogers, 2012, “The corporation is governed primarily by the statutory

3 guidelines of the state that provides for its creation.” Most corporations have a goal of returning a profit to their shareholders. Finally, LLC can be a good choice for medium or higher-risk businesses as mentioned in U.S Small Business Administration . LLC will be my business structure. I have chosen this structure because it will be more accommodating to how I would like to run my company. First, the LLC is a structure that I will benefit from having both corporation and partnership, I can keep my personal and business assets separate. My siblings and I will benefit from cases of liability. Not having personal liability can be very serious, if not covered one could be held liable, could lose your business, and can be sued. Even though LLCs are for protecting their owners there could be situations where they don’t. According to Salisbury, 2001, “limited liability companies, by definition, are intended to insulate owners from personal liability beyond the scope of their capital contributions, "limited liability" is a generalization, and there are important and noteworthy exceptions of which small business owners must be aware.” Taking account and knowing your legal and personal responsibility will help in the long run. Limited Liability Companies are becoming more common and vary from state to state. This formation will cover me and my siblings as far as taxes and any debts the business may or may not occur. Starting off as a small business will help mold the way I would want to proceed in future endeavors. Sherika’s Custom Design LLC will patent its name and become more organized at the start of the business and fill out all paperwork and tax paperwork as necessary. Since this is an LLC, it will take advantage of both the corporate and partnership benefits for my siblings and me. Taxation is one of the biggest causes for a business to lose control or even bankrupt. As mentioned in Fishman, 2003, “Earning a profit from your invention triggers new tax obligations

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4 including income and self-employment taxes.” Sherika’s Custom Design LLC will have a specialist for taxes to keep owners/co-owners informed and up to date on what should be done for taxes and employee benefits. The importance of benefits is that Sherika’s Design will always be readily available. Businesses and corporations use tax variation forms in their own unique way. Identifying my unique tax form for my company can help with income tax, sales, and contributions. When it comes to owning your own business, one must be cautious of legal and certain terminology. To be better prepared, I must be able to form a structure that will best fit my business, an LLC would be the best choice for me to take advantage of both corporate and partnership benefits. One of the advantages “is that there are generally no restrictions on how many members an LLC may have or who can be a member.” (Jackson, 2002). In this instance, as mentioned prior I may have my siblings work with me. Relatively easy to establish, also, LLCs are not required to pay federal tax. There are some disadvantages as well when it comes to LLC. LLCs will not always cover personal liability, require annual filing fees in some states, and can be more expensive than a partnership. In the end, know your rights legally and protect your business and yourself. Owning a business can be stressful and exhausting, but if handled correctly it can be your biggest success story.

5 References Fishman, S. (2003). Inventor’s Guide to Law, Business & Taxes . Nolo. Jackson, T. (2002, August 5). The advantages and disadvantages of setting up an LLC. (Ask the lawyer). Air Conditioning, Heating & Refrigeration News , 216 (14). Rogers, S. (2012). Essentials of business law . Bridgepoint Education. Salisbury, D. W. (2001, February 12). LLCs don’t always guarantee shield from personal liability. Crain’s Cleveland Business , 22 (7).

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