The forms of business organization, otherwise known as business entities, are critical for the functioning of the company in the modern economy. The type of business organization impacts elements such as taxation, legal liability, and investment possibilities. Oftentimes, the business entity also reflects the scope, size, and nature of the business, as well as the management structure that it legally and practically adopts (Perez, 2020). Selecting the form of business organization is the primary step that each new business must take upon registration.
Compare and Contrast
Personal Business
A business that I would like to own is a chain of locations that specializes in renting electronics and equipment. This ranges from laptops and gaming consoles to instruments and yard tools. The mission would be to provide access to consumers for those things they may need urgently because they simply do not have one or theirs broke, but they do not wish to or do not have the resources to purchase a new item. The model would work that consumers would pay per day of leasing, with the cost depending on the total cost of the item. Consumers will also sign an agreement taking on responsibility and safety of using the item, and also bearing the cost of any damages and repairs to the item that may occur due to consumer actions or influence or while in their possession other than mechanical defects stemming from the object itself. The shops will keep a wide range of options in the inventory, focusing more on quality of items and consumer demand, thus with a shifting selection, but attempt to streamline as much as possible, potentially even having a shared warehouse among stores to move objects around as demand sees fit.
The best business form for this business would be an LLC for several reasons. It is planned to be a chain of small stores to serve a wide area of consumers, particularly in the suburbs, potentially being a franchise. This type of company will also require significant financial input and other partner stakeholders may be involved. An LLC is vital to protecting each owner’s assets and interests from liabilities that franchising activity might cause. It offers similar protections to that of a corporation, but remains much simpler and cheaper, and the business is likely to remain a small-medium sized business. Furthermore, the nature of the business of providing technology and power tools to consumers is one that is expected to face lawsuits. Despite consumers having to sign agreements to take full responsibility, it is likely that the business will face lawsuits in case of injury or other adverse events. An LLC further protects personal assets of the owners from the hostile lawsuits and any penalties that may arise, with the LLC assets bearing the cost of any debts or legal sanctions.
References
Pătru, R. S. (2018). Theoretical and practical aspects regarding limited liability companies. Challenges of the Knowledge Society, 283-287. Web.
Perez, W. (2020). What is a business entity? Web.
Rozario, R. X. (2018). Limited liability partnership: An effective alternative to complexity of incorporation and the personal risks associated with partnership law. International Journal of Research in Engineering, Science and Management, 1(10), 128-131. Web.
U.S. Small Business Administration. (n.d.). Choose a business structure. Web.