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Legal Forms of Business: Develop scenarios in which each form would be the preferred form.

Consider each of the following forms of business: sole proprietorship, partnership, limited liability partnership, limited liability company, S corporation, franchise, and corporate form. Develop scenarios in which each of these forms of business would be the preferred form. For each scenario, justify why the corresponding business form is preferred.

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Legal Forms of Business

Sole proprietorship


Joan is a business owner running a grocery store, Joan's Grocery store. Joan runs the business and has employed two attendants in her store. She registered the business in her own name and secured the license to the business. She also signs contracts and receives cheques for the business in her own name. Joan makes all the decisions concerning the operations and running of the store and at times pays debts incurred by the business from her own pocket, or pays her own personal debts with money from the business. In this case scenario, Sole Proprietorship is the preferred form of business. The business that Joan is running is a sole proprietor.


In the above case scenario, the amount of formalities involved in the business is very minimal and Joan freely mixes her personal assets with business assets. Joan is also liable for the debts liabilities and losses that the business may incur. These are the main tenets of sole proprietorship (Entrepreneur, 2005).



John who is working full time as a software sales manager started up a business that sells and programs inventory tracking systems. He recruited Peter his friend to run the business for him while he is still fully employed. These two didn't sign any operating agreement on the terms of the business relationship. When they finally discussed it, they could not agree on any other term but splitting the business on a 50-50 ownership. John quit his other job to run his business fully but big problems arose with Peter putting a claim on the business. Without any operating agreement these two were caught up in fight. The best business form that would be advisable in this case scenario would have been a limited liability partnership.


A partnership is an ...

Solution Summary

This solution provides a scenario and justification for each form of business in 1095 words with six references.