Business Organization Analysis Project

You chose a potential business you were interested in starting in Week 3. I Chose General Proprietorship.

For the Business Organization Analysis Project, you’ll identify how you’ll form the business based on the options in the advantages/disadvantages summary chart.

Your analysis should be 4-6 pages (typed, double-spaced) in length (cover pages and reference pages do not count towards the page count).

Generally, you should answer the questions below within your analysis. Feel free to discuss other areas but make sure the following are answered at a minimum:

Understanding
Is the business idea chosen and clearly identified?
Weigh the advantages/disadvantages of two different types of business formations specific to your organization.
Discuss who the typical customers are and discuss whether which organization type of the two chosen above is appropriate to better serve/deal with those customers.
Analysis
Do you see any issues with formation/dissolving your organization?
What governance issues do you foresee?
What gaps are there that may give rise to liability?
Are there any competitors you can find? If so, who are they and how are they formed?
Do you find any items particularly interesting or unique about your organization? How will you handle these?
Recommendations
Discuss why this type of business was chosen for your organization.
Provide a recommendation on how to insure this business.
Document the steps needed within your jurisdiction to form this entity.

Note that the paper must also include a list of references, use headings (understanding, analysis, and recommendations) as listed above, and cite all sources using an acceptable citation format (APA or MLA).

Type of Entity Main Advantages Main Drawbacks
Sole Proprietorship

Simple and inexpensive to create and operate

Owner reports profit or loss on his or her personal tax return Owner personally liable for business debts
General Proprietorship

Simple and inexpensive to create and operate

Owners (partners) report their share of profit or loss on their personal tax returns Owners (partners) personally liable for business debts
Limited Proprietorship

Limited partners have limited personal liability for business debts as long as they don’t participate in management

General partners can raise cash without involving outside investors in management of business

General partners personally liable for business debts

More expensive to create than general partnership

Suitable mainly for companies that invest in real estate
Regular Corporation

Owners have limited personal liability for business debts

Fringe benefits can be deducted as business expense

Owners can split corporate profit among owners and corporation, paying lower overall tax rate

More expensive to create than partnership or sole proprietorship

Owners must meet legal requirements for stock registration and paperwork

Separate taxable entity
S Corporation

Owners have limited personal liability for business debts

Owners report their share of corporate profit or loss on their personal tax returns

Owners can use corporate loss to offset income from other sources

More expensive to create than partnership or sole proprietorship

Owners must meet legal requirements for registration and paperwork

Income must be allocated to owners according to their ownership interests

Fringe benefits limited for owners who own more than 2% of shares
Professional Corporation Owners have no personal liability for malpractice of other owners

More expensive to create than partnership or sole proprietorship

Owners must meet legal requirements for registration
Nonprofit Corporation

Corporation doesn’t pay income taxes

Contributions to charitable corporations are tax-deductible

Fringe benefits can be deducted as business expense

Full tax advantages available only to groups organized for charitable, scientific, educational, literary or religious purposes

Property transferred to corporation stays there; if corporation ends, property must go to another nonprofit
Limited Liability Company

Owners have limited personal liability for business debts even if they participate in management

Profit and loss can be allocated differently than ownership interests

A recent hybrid not yet available in all states

Tax treatment (as a partnership) requires strict compliance with IRS guidelines