1. 1
Business Structures
Tricia Strite
UMGC
BMGT 380 - 6380
Prof Janet Fiorentino
July 4, 2021
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2. 2
A comparison matrix showing the five types of business structures
Type of
Structure
Procedure for Formation Cost of
Formation
Liability Benefit
General
Partnership
Essentially, a general partnership
can be denoted as a form of
business where two or more
individuals share the business
ownership (Reuters, n.d.). This
form of business enables each
individual to become and act
independently, avoid pulling in
large amounts of formalities,
avoid high startup costs and have
the chance to pool large
resources. The most notable
method of this type of business is
through an agreement made
between the partners. The
agreement can be in a written
format or either in an oral
structure of the agreement.
The formation
cost is very low
given that even
oral agreement
is applicable
how in some
cases, it varies
depending on
the depth and
length of the
agreement
(Reuters, n.d.).
All partner
has unlimited
liabilities.
This form of
business is not
entitled to pay
income tax.
However, the
owners are entitled
to pay income tax.
Limited
Partnership
A Limited partnership has few
significant differences from a
general partnership. Its
management is in the hands of a
general partner who also has
unlimited liabilities for the
business's obligations and debts.
This form of business is
registered under the limited
partnership act (Reuters, n.d.).
The cost of
formation is
higher
compared to a
general
partnership.
Essentially,
there are legal
fees required
for paperwork
of which varies
from one state
to the other.
Members
have limited
liability
The pass-through
taxation method is
utilized to tax
limited
partnerships.
Losses and profits
are transferred to
members and
reported on their
personal tax
returns.
Limited
Liability
Partnership
A specific registration is made by
filing the incorporation form
during the formation of a limited
liability partnership.
The formation
cost is lower
than LLCs and
corporations but
higher than LP
and GP.
The liability
of every
partner is
limited.
Tax is applicable
only as a
partnership
General
Corporation
During the formation of this form
of business, more legal
requirements are needed. There
are different federal and
regulations and rules to be
followed. Formal paperwork is
There are high
fees for
administration.
Limited With ambiguous
legal requirements,
the tax procedure is
complex.
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3. 3
identifiable as "Articles of
incorporation" need to be filled.
Shareholders are the prime owner
of this form of business structure.
(Harvard Business Services, Inc,
2017).
Limited
Liability
Company
Limited Liability Company is
formulated by one or more
individuals. A specific agreement
is required, and a form of Articles
of organization need to be filed.
There is a
variation of
prices for filling
and registration
fees, all
depending on
the state
government.
Limited A limited liability
company is
portrayed as a
pass-through entity.
LLC does not pay
income taxes.
Losses and profits
are transferred to
owners who are
taxes on their
personal tax
returns.
Report
TO: Winnie James, Ralph Anders
FROM: Tricia Strite
RE: Clean Business Structure
DATE: July 4, 2021
The ideal business structure recommendable to Clean-N-Shine is a Limited Liability
Company. This form of business structure can offer an alternative to operating as a partnership or
cooperation giving it a combined advantage. Partners have the upper hand in protecting their
assets from the company's obligation and debts and also has tax advantage with limited
restrictions (SBA, 2019).
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4. 4
In other words, LLC protects the business owners with limited liability and their personal
assets cannot be challenged or be used to pay business debts if the business fails. Additionally,
this business structure will allow lower tax rates since owners have the option of distributing
income; hence individuals are tax separately, or they can opt to be taxed at the corporate level
(Limited Liability Company, n.d.). There is no possibility of double taxation since taxes amount
would be at a single level. Owners have more control of daily function and operations within the
firm without being tied to all the organization's liabilities. In a nutshell, members within this
form of business structure enjoy great flexibility in managing the business.
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5. 5
References
Harvard Business Services, Inc. (2017). What Is a General Corporation? Delawareinc.com.
https://www.delawareinc.com/general-corporation/
Limited Liability Company. (n.d.). Limited Liability Company | Should I start an LLC for my
business? Www.incfile.com. Retrieved July 2, 2021, from
https://www.incfile.com/limited-liability-company
Reuters, T. (n.d.). Types of Partnerships. Findlaw. Retrieved July 2, 2021, from
https://www.findlaw.com/smallbusiness/incorporation-and-legal-structures/types-of-
partnerships.html
SBA. (2019). Choose a business structure. Choose a Business Structure.
https://www.sba.gov/business-guide/launch-your-business/choose-business-structure
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