Small Business Idea Paper
Gabrielle M Profit
May 8, 2013
James Carlin University of Phoenix
Small Business Idea Paper The choice of a business structure when starting a business is vital. Each structure holds features of that businesses design. With innumerable changes in the economic environment requirements of business owners include choosing an optimum structure for their start-up as well as continually reassessing their original choice of structure. This paper will discuss four different business structures, which are sole proprietorship, partnership, corporation, and limited liability companies. Furthermore, discussed will be various tax implications that apply to these business structures as well as a small business called Wings of Angels Adult Day Services.
Wings of Angels are an Adult Day Center that will provide health and social services to senior citizens ages 55 and older five days a week from the hours of 6:30am to 6:30pm. With more seniors now living with family there is an increased need for elderly care. Statistics show that one out of every eight American is over the age of 65. As life expectancy continue to rise, the need for Adult Day Services will only increase further for elderly who can no longer manage independently, who are isolate, and who are lonely.
Wings of Angels will provide multiple services to this growing population such as, health related services, medication management, social services, personal assistance, meals, personal care services, caregiver support groups and transportation. Before choosing which business structure will be the best choice for Wings of Angels we will review the four different forms of businesses.
Sole Proprietorship A business owned by a sole proprietorship entails that it is a business owned by one person. This form of business is easy to get started and gives full control to the owner to make any decisions pertaining to the business. The owner could have no employees, close at any time, or pass the business on to any of their heirs. Examples of sole proprietorship businesses include barber shops, retail stores, repair shop, and law offices (Kimmel, Weygandt, & Kieso, 2009). A sole proprietor pays taxes as part of their individual income tax. Businesses that require licenses are usually less for a sole proprietorship, as well as start-up costs. However, in a sole proprietorship the owner takes full personal liability for all debts incurred by the business. Creditors can come after the owners personal assets if the business is unable to cover debts (www.sba.gov).
A partnership entails a business that is owned by two or more people. Partnerships are usually formed as an advantage to help increase capital. Partnerships are relatively easy to enter and exit. When involved in a partnership, all partners should formalize duties and contributions in a written partnership agreement. Examples of partnerships usually include professional practices such as doctors, architects, and lawyers (Kimmel, Weygandt, & Kieso, 2009). Partnerships pay taxes the same way sole proprietorships do. This means that each partner needs to submit a tax return. As a partnership, if there is an increase in revenue each partner will be taxed accordingly. Furthermore, all partners share equally in profits. This can appear to be a disadvantage by creating inconsistency’s in everyone fulfilling their duties (www.sba.gov).
A corporation is a business organized as a separate entity owned by stockholders. Unlike sole proprietorships and partnerships a corporation can easily raise funds by allowing other individuals to become stockholders and invest small amounts of money into the corporation. A corporation is relatively harder to form then a partnership or sole proprietorship due to the time and money it takes to form. Corporations also have more regulations and