Forms of Ownership

Instructions: Overview
Once an entrepreneur has come up with an idea for a product or service that meets a need, they begin to
investigate which form of ownership best suits their goals. They will have to consider the immediate and
long-range goals and the pros and cons of each. This decision will impact financial and managerial
decisions.
Forms of Ownership are covered in this module’s readings and Exploration. In this assignment, you will
compare and contrast the different options available for a business owner. Instructions for this
assignment are found in the Assignments section of the appropriate Module in Content.
Outcome: 2. Compare and contrast different forms of business ownership. (B)
Business Owner Scenario
John experienced great success with his first food truck, Tasty Taco Treats. The menu features
extraordinary tacos, not the ground beef ones you are so familiar with. The business has won many
awards for its delicious, unique menu items. John began this business operating as a sole proprietorship.
John’s good friend, Luis, is a talented chef who is very interested in helping John expand. Working closely
together, they have created a larger menu and made the decision to move from the food truck operation
to a restaurant. The opening of the first brick-and-mortar location is in the works.
Anna, who has helped John run the food truck, is planning the design of the food service space and will be
running the customer service part of the restaurant.
John is considering restructuring the form of business ownership and has come to you for some advice.

Forms of Ownership

Ownership Options

The options for ownership for John are a partnership as well as an LLC. A partnership is a group of at least two owners that control the business. The advantage of this kind of ownership for John is the fact that it permits the sharing of the startup costs and expenses, and allows for separation of labor and thus more time for work, the capital infusion tends to be more straightforward, as well as the the ability to gain the expertise and experience of other partners (Fath 2022). The disadvantages with this kind of business are that it is liable for the burden of liability and also loses autonomy because decisions are taken jointly as well as the risk of conflicting patterns and business operations may be complicated when one of the partners is not in agreement. In a liability-limited company John’s and the partners assets will be secured in the event of a business going insolvent. The benefits of this type of ownership is that it is tax-deductible for losses incurred by businesses The shareholders aren’t responsible for the business’s liabilities and it offers the ability to choose from a variety of tax structures (Hurt 2020). The drawback of this kind of business is it’s difficult to raise the capital required and is costly to start.

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