Business Structure Advice

Dear John Owner,

Starting a business is a very big decision and will be one of the most
challenging adventures that you will participate in. You emailed me asking
for my advice concerning business structures and how to proceed given
your newly devised business plan. I have attached a table that I created
that gives you the information you are looking for. The table contains the
business structures that are most common, a brief overview of the
structures, advantages, disadvantages, and possible tax implications of
each business structure. I have put this information in table form with bullet
points so that it is easy to understand. I believe that the information that I
have given you will better help you make that important decision regarding
the business structure of your company.
Please look over the information below and consider all of your options
carefully. There is no right or wrong answer when it comes to choosing a
business structure. The right structure is the one that works best with your
business plan and needs. If you have any questions regarding the
information, please feel free to contact me anytime.
Respectfully,
Nichole Coates, Consultant
Business Structure Type
Overview of Structure
Advantages
Disadvantages Tax Consequence
of Business Structure
Sole Proprietorship 75% of businesses make up this type of structure
One owner and small number of employees Simple to start

 Least regulated
Owner makes all decisions
Owner keeps all profits Owner responsible to pay all bills
Owner has unlimited liability
Equity of business is tied to owners personal wealth
Ownership is difficult to transfer
Difficult to raise money for business Sole proprietorships are subject to
lower income taxes than other types of structure.
Partnership
Two or more owners that are legally tied to the business
10% of all businesses make up this type of structure Simple to start
Less regulated than other types of structures
Owners keep all profits Unlimited liability for partnerships actions and
debts
Equity of business is related to owners personal wealth
Difficult to raise money for business Partnerships have lower income
taxes than other types of structures.
Corporation Authorized under a state charter
Can sue and be sued, enter into business contracts, issue debt, borrow
money, and own assets
15% of businesses make up this type of structure Stockholders only
carry limited liability for debts and other obligations of the business
Ability to generate capital

 Very costly to start

Difficult to earn a profit in the short run
Increased licensing fees
Limited control for owners
Highly regulated by federal, state, and local agencies The owners in a
corporation are subject to double taxation.
Limited Liability Partnership Hybrid structure Partner does not have
personal liability for negligence of the other partner
Shared profits
Limited control for owners
Difficult to raise money for business
The limited liability partnership has the same tax advantage as a
partnership. There is no double taxation on this type of structur