When beginning a business, a decision has to be made as to what form of business unit to establish.
The usual forms of business entity are the following:
- the sole proprietorship,
- Business partnership;
- Corporation,
Choosing the right business entity relatively depends on the resources, the line of endeavor, economic factor or finances and tax considerations.
When you have a considerable amount of finances, a choice of having a business partnership is more likely recommended than a corporation.
From among the various forms of business organization, partnership is said to be a highly adaptable form.
The advantages of a business partnership are the following:
- Each partner shares directly in the business's profits and shares control in the operation of the business;
- As to liability, partners are jointly and independently liable for the partnership's debts;
· The partner’s relationship may be formed informally;
· The federal law plays a minimal role in partnership law except in the diversity action, or in instances where a partnership agreement contains an effective choice-of-law provision designating the application of federal law;
· For state and federal tax purposes, a partnership is not a taxable entity. Partnership income is taxable to the partners in proportion to their share in the company's profits.
In the process of incorporation, you would mind the varying state or federal law requirements.
Aside from the state requirements, incorporation of a corporation is a formal act and needs the vesting of the state.
The sharing of profits as well as the distribution of liabilities is pretty much tricky in a corporate entity.
Viewing the foregoing, to my mind, it is beyond cavil that a business partnership is more likely favored than a corporation.
This assessment however, is necessary limited and focused more on the practical applicability of the form of business organization that most people can afford to venture.
This is of course not discounting the great avenue of a business corporation.
For practicality and viability considerations, business partnership is more favored than a corporate entity.
