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Choosing an Appropriate Business Ownership Model

List possible alternatives and provide reasons why your solution is best. Include comments related to ethical issues that may arise.


Buddy operates a handyman business performing various home repairs and renovations. Buddy is successful and has enough loyal customers to keep him busy, along with at least two workers. Buddy occasionally rents out some of his small equipment to other handymen and clients.

Buddy also purchases homes that need renovation and then rents or sells the properties, depending on the market. Most of the homes he owns are heavily mortgaged.

Buddy and his wife own a house, in which they have a reasonable amount of equity. Buddy's wife handles the books for the business.

Which type of business organization is best for Buddy? Explain the advantages and disadvantages of your selection and why your answer is best.

Solution Preview

Buddy should set his handyman business as a limited liability company (LLC). This is beneficial to Buddy because he will get some benefits of both a corporation and a sole proprietorship. Like a sole proprietorship, Buddy's handyman earnings will pass through his personal taxes. He will be responsible for income and employment taxes. This offers some tax benefits. Since Buddy has two workers and occasionally rents out his equipment, Buddy would benefit from the liability protection of this option.

A limited liability company provides "a financial and legal barrier for the personal assets of its' members" (Bigd, 2012) under the condition his behavior is not judged to be reckless, illegal or fraudulent. This option provides protection to personal assets, which a sole proprietorship and partnership do not. This will protect Buddy from his business debts. This means that Buddy and his wife's home would be protected, should something happen and his business was unable to pay its' bills. Another benefit to this choice is that the business will not be subject to corporate tax or double taxation. There is limited ...

Solution Summary

This solution lists possible alternatives and provides reasons for why solution is best regarding the ethical issues based on Buddy operating a handyman business and determining which is the best type of business organization is best plus the advantages and disadvantages of the selection.Includes APA formatted references.