The small business idea of interest is a Montessori school that will provide a Montessori experience to inner city children at an affordable price. Maria Montessori was the creator of the Montessori Method over a hundred years ago. As stated by in the article, Montessori School Celebrates 30 Years, “she began working with underprivileged children in the slums. Soon, these children began scoring higher in standardized testing than average children” (Lockhead, 2010, n.p.). The Montessori Method is to take every child as individuals and create a curriculum around his or her needs. Over the years inner city Montessori schools have become extremely expensive over the years. The goal to bring the Montessori experience back to its original state is the ultimate goal. To qualify for the newly release of government funding, the following will describe the advantages and disadvantages of the four different forms of business (sole proprietorship and partnership, corporation, and limited liability), the type of financial statements for each form of business, any tax implications, and legal implications. The business plan can discuss the services for the Montessori school, which form of business is best for the business idea, and the reasoning behind choosing to move forward with the business form. The idea for the small business will promote the Montessori school and become successful in getting parents to enroll their inner city children. Montessori schools have tuition cost associated with enrollment and by offering an income bracket will attract more inner city families.
Advantages and Disadvantages
Every business form has advantages and disadvantages. A sole proprietorship has on one owner. The owner will hold liability for its business debts, income, and its losses. The simple business form only requires a certificate or business license for doing business. This type of business is not subject to any financial reporting requirements. The sole owner has total management control of the company in addition not paying taxes. As it states in the article, “Choosing a Business Structure” disadvantages is that the owner is personally liable for the debts of the business, the capital of the business is at a limit to the owner’s business and personal resources, the business can only terminate upon death, and it cannot have employees (Callaway, Wolf, Kramer, 2002). A partnership consists of two or more individuals operating a business as co-owners, which they both will share the responsibility of management. The advantages of a partnership are similar to a sole proprietorship. “The primary disadvantages of doing business in partnership form are that partners are personally liable for the debts of the partnership (Callaway, Wolf, Kramer, 2002, p. 42).” Partnerships are subject to file federal tax returns.
A corporation has no similarities to a sole proprietorship or a partnership. A corporation is a formal entity separate than the owner, the owners are also the shareholders. Two advantages of a corporation are the owners/shareholders cannot be held responsible for business debts and in the event that a shareholder dies, the business will remain active. The disadvantages are double taxation because it will pay taxes on its profits. Additional disadvantages include complete cooperation and compliance to state law causing shareholders to file for certificate of incorporation. These standards will make the company responsible for reporting requirements.
The last form of business is a limited liability company. A limited liability company combines the characteristics of a corporation and a partnership. Owners of a limited liability can refer to its owner as a member and can elect management responsibilities. The advantages of an LLC form is that they hold no personal liability for their debts, it carries a permit to operate in different states, and it is not liable to federal income tax