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    The best form of business ownership

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    1. For each of the following small businesses, describe the best form of business ownership: sole proprietor, partnership, or corporation. The small businesses include the following:

    * Retail electronics
    * Software developer
    * Advertising

    2. Justify and explain why it is the best form of ownership for each particular business.

    3. Be sure to include the advantages and disadvantages of the form of ownership in your discussion.

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    Solution Preview

    Any of the three listed business start-ups can be started as a sole proprietorship. To start as a SP, the only requirement is a willingness to begin the business. No other legal requirements are necessary.

    For the electronics retailer, I would begin the business as a corporation. A business like this has the possibility, after time in business and after the business has begun to grow considerably, to become a franchise, much like Radio Shack and similar entities have become.

    By becoming a corporation right from the beginning, there would be limited liability to the owners, and the owner or owners would receive corporate tax treatment. The owner would only be required to pay taxes on corporate profits, that are paid to the owner as salaries, bonuses, and dividends. The corporation pays taxes at the corporate tax rate, on profits. The owner retains control of the corporation, through an elected board of directors. Although this point won't be as big of a matter at the start-up, if the electronics business really takes off, it definitely will make a difference.

    Even though this is the best choice for this type of entity, there are several ...

    Solution Summary

    The solution provides a detailed discussion explaining the best form of business ownership for small businesses that include retail electronics, a software developer, and advertising.