Chapter B, Problem B1.1MBD

Program Plan Intro

Common business forms:

• Sole proprietorship:
  • A single person is only owner and accountable for all profits and losses of business.
  • It is quickest and easiest way for setting up a business operation.
  • No specific costs are been associated with starting a sole proprietorship.
  • A license cost of 25$ from local country clerk is enough for starting sole proprietorship
• Partnership:
  • It permits for more than one proprietor.
  • Each partner will be personally responsible for all profits as well as losses of business.
  • No specific costs are been associated with starting a partnership.
  • A partnership agreement denotes a legal contract between two or more business partners that would outline core issues in business.
  • A limited partnership is like a general partnership apart from that it protects limited partner from responsibilities of losses.
• Corporation:
  • It is an artificially formed legal entity that would exist separately, apart from persons who created and carry out operations.
  • The business entity differs from business owners.
  • A limited liability is delivered for shareholders in a corporation.
  • The types of corporation includes:
    • For profit corporations
      • It focuses on making money; profits as well as losses are shared by business owners.
    • Not for profit corporations
      • It accomplishes some charitable, philanthropic or educational purpose.
      • Profits as well as losses are not been shared by business owners.

Explanation of Solution

Comparison of business forms:

	Sole proprietorship	Partnership	Corporation
Licensing	Local license is needed, worth 25 $ only.	Partnership agreement and legal fees required	Incorporation articles by secretary of state.
Income	Profit flows into income	Distributed among partners as decided	Personal earnings and business remains separate
Liability	Owner is liable	Owners are liable	Business is liable

Recommendation:

• A limited liability partnership is been recommended to Olivia for her business.
• It protects her from liabilities.
• If one person becomes a limited partner then liabilities may differ.
• Hence, partnership would be best option for Olivia.