Main Types of Business Entities

Question

Prompt: Read the case study below. In your discussion, address the critical element that follows.
Case Study Three: Jeb and Josh are lifelong friends. Jeb is a wealthy wind-power tycoon, and Josh is an active outdoor enthusiast. They have decided to open a
sporting goods store, Arcadia Sports, using Jeb’s considerable financial resources and Josh’s extensive knowledge of all things outdoors. In addition to selling
sporting goods, the store will provide whitewater rafting, rock-climbing, and camping excursions. Jeb will not participate in the day-to-day operations of the
store or in the excursions. Both Jeb and Josh have agreed to split the profits down the middle. On the first whitewater rafting excursion, a customer named Jane
falls off the raft and suffers a severe concussion and permanent damage to her spine. Meanwhile, Jeb’s wind farms are shut down by government regulators,
and he goes bankrupt, leaving extensive personal creditors looking to collect.
Specifically, the following critical element must be addressed:
· Identify the main types of business entities and discuss the advantages and disadvantages of each.

Answer

Main Types of Business Entities

            There are various types of business entities. The main one includes sole proprietorship and partnerships. A sole proprietorship is a business that is run by one individual for their personal benefit (Bain & Nowak, 2016). The business is in existence as long as the owner is alive. All the liabilities of the company are also shouldered by the owner. The personal assets of the owner can be used to undertake the risks of the business. The advantages of a sole proprietorship include minimum legal requirements, easy to run, the owner is the boss hence is involved in the entire decision making, and the business can be terminated easily. Its disadvantages include the unlimited liability, difficulty in raising funds, and the challenge of the life of the business being limited to the existence of the owner.

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            A partnership is a type of business that is established and operated by a combination of two or more individuals. The partners merge their resources in the establishment and running of the business. They then divide the profits and losses amongst themselves based on the agreed ratio. There are two types of partnerships; general and limited. A general partnership is characterized by a business arrangement in which the partners involved have unlimited liability (Callison& Sullivan, 2012). This implies that their personal assets can be used to cover the debts of the business. Limitedpartnershipsrestrict the personal liability of each person to their contributions to capital for the business. The law requires that the partners file a certificate of the limited partnership. The advantages of a partnership business include the possibility of having greater capital due to contributions from each member and the availability of more resources to help in decision-making, creativity, and support (Spadaccini, 2007). The disadvantages include difficulty in decision making and unlimited liability in the case of general partnerships.

References

Bain, P. L., & Nowak, K. (2016). Sole Proprietorships. NY Practice Guide: Business and Commercial1.

Callison, J. W., & Sullivan, M. A. (2012). Partnership Law and Practice: General and Limited Partnerships. London: WestPress.

Spadaccini, M. (2007). Business structures. Irvine, CA: Entrepreneur Press.

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