Question

The three primary forms of business are sole proprietorships, partnerships, and corporations. You are contemplating starting a business. For each of the following proposals, explain which of the three types of businesses would be most appropriate. In each case describe the advantages and disadvantages of your choice.

(a) You are a music lover and are disgusted with the selection of compact discs available at the stores near your college. So, you decide to open up a store selling new and used compact discs.

(b) After a late night cram session, you and your roommate are in need of some pizza, but no restaurants are open. You decide to open an all night pizza parlor.

(c) You have an idea that will make you a billionaire before you graduate from college: a pizza delivery service - from any restaurant to any dorm. In order to make your revenue goal a reality, a local venture capital firm has informed you that you will need to nationally franchise your operation.

Answer 1

(a) The most appropriate form of business is sole proprietorship for a music lover. Because then you will be your own boss. However, it may be hard to get to stock your store and there will unlimited liability , f the store goes bankrupt.

(b) Since, there are two people , you and your roommate . And they intend to split the profits that they earned from the pizza parlor. So, the form of business is partnership . There are some risks you might have a hard time getting funding and you could sick with your roommate. And you both are fully responsible for paying the debts.

(c) In order to create a nationally franchise delivery srvice , then the appropriate form of business would be corporation. This increase the ability to get funds and also limit your personal liability . But it also means that you need to hire an accountant . And also corporation will be subject to corporate income taxes.