Running Head: BUS105 Unit 1 Individual Project 1

BUS105 Unit 1 Individual Project

Raven S. Benson

BUS105: Business and Society

Even Alexandra A. Clausen

October 9th, 2009

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BUS105 Unit 1 Individual Project

My name is Raven Skye Benson. With a name like mine, I want to believe the sky is not

my boundary, but a stepping point to my greater goal. The big goal I am working towards, is to

become a successful studio artist contracted with the likes of Universal and Disney. For me to

achieve this goal, there are many things I have to learn. The best place to set up a business, the

people I need to show my art too to get noticed, and being able to professionally advertise to a

large audience. These are the main reasons I have chosen an associate degree in businesses

administration, so I can then work up to a bachelors in visual communications.

Before discussing the different types of business structures one should first look at the

factors governing one’s choices. Tax Rates of a sole proprietorship for example (as discussed in

Legal and Structural Considerations1995), can be up to 39.6%. Liability Protection should also

be looked at, since both partnerships and sole proprietorships “generally incur unlimited personal

liability in a lawsuit” (Legal and Structural Considerations 1995).

Another important factor is the existence of losses. Losses greatly affect any company;

however a limited liability corporation (LLC) could move the liability of the losses onto all the

share holders, not just one or two people as in a partnership or a sole proprietorship. There are a

lot of factors, and they are all very important when starting a businesses, the three described here

were deemed most important by me.

Just like there are many factors to think about when starting a business, there are also

many different types of business structures. The three that will be discussed here are: the sole

proprietorship, partnership, and corporation

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A sole proprietorship is a business started and owned by one person(Legal and Structural

Considerations 1995), but that does not mean they operate it alone. Assistant managers and other

types of employees can be hired if there is money to pay their wages. Along with being your own

boss, you must also pay taxes. Business and personal income are the same, and will all have to

be placed on tax forms. Since running a sole proprietorship can be a simple or a complex

business depending on the vision of the entrepreneur, there is almost an unlimited amount of

possibilities for the business to grow and expand.

There is some negativity that comes with a sole proprietorship (as with any action people

decide to take). One of the cons for a sole proprietorship is total liability. This means all the

money lost from the business is lost for you. It also means that if someone was to sue your

business, the money they win would come out of your pocket. However, general liability

insurance will be able to help protect one’s business. Another con, business choices are often

difficult to make. Unlike other types of businesses where you have people to fall back on, in a

sole proprietorship, if you fail, you fail alone.

Partnerships are different from sole proprietorships, the biggest difference being that

partnerships have two or more entrepreneurs instead of one (Legal and Structural Considerations

1995). Partnerships could be where one partner actually works for the other, pays less tax and

holds less liability. Ownership is complex in partnerships. It is like a marriage, and any

disagreement between you and the other partner(s) could cause a divorce, or extermination of the

business. Decision making can be less difficult as it would be with a sole proprietorship.

Within the world of business, there is actually more than one form of partnership.

Generally these other forms are referred to as general partnerships and limited liability

partnerships. A General Partnership vies for joint profit, and most of the time is bound by a

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contract or another form of document which states the rules the partners put into place for one

another. They also accept full financial liability. In a Limited Liability Partnership (LLP), limited

partners are liable only for the partner’s cash and property they contribute and distribute.

The final type of business is the corporation. There are several types of corporations;

however the two I am going to talk about here are limited liability companies (LLC) and the

basic regular corporations. LLCs are actually quite popular with people, because they protect

each individual owner from any personal liability (Legal and Structural Considerations 1995). A

major advantage of LLCs is the exemption from federal corporate tax. However, taxes are

difficult for LLC investors because the IRS doesn’t recognize general and limited partners.

Regular corporations tend to be larger businesses, and are legal entities separate from

their owners (Legal and Structural Considerations 1995). The major advantage of a regular

corporation is limited liability. A major disadvantage is the potential for double taxation. With

double taxes, the owner is responsible for paying both state and federal taxes, as well as the

shareholder who receive dividends.

When I decided to push my art studio from a free website to an actual website that has its

own domain name and a building to work from, I will do this as a sole proprietor. The reasoning

behind this decision is the fact I’ll be my own boss. The sole financial responsibility doesn’t

scare me at all, since plenty of artists come and go, and even though most of them don’t acclaim

the status they desire, I can at least say that I tried if the business fall through.

Flexibility is also a plus, especially when you’re an artist. However, with me making all the

choices, all the responsibility will fall on me. If I get commissioned to paint a mural, and fail to

get it done by the requested date, again the responsibility falls solely on me and no one else. The

other business structures could work with an art studio, such as a professional cartooning

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corporation, or a partnership between me and another artist. However I think it would be best for

me to work alone as a sole proprietor in the sense that I want to be a freelance artist and not want

to answer to anyone, save the IRS and my costumers.

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Resources

1. Legal and Structural Considerations 1995

Publisher : American Psychological Association (2009)

2. Chat 2

3. Unit 1 Multimedia Course Material