elingAdvisories for Small Business Administration Counseling
A general partnership between the doctors in the group is the type of business ownership that should be recommended in this case. This ownership plan leaves the partnership open to additional members and allows all the members to manage and share equally in any profits. (Ebert et al, 2005)
This ownership plan is often utilized by professionals, such and doctors and lawyers, and its advantages include few legal regulations beyond drawing a partnership document and that it will be more likely for the partnership to get loans and funds than a sole proprietorship. As well, the partnership can grow with the addition of new members or partners and capital. (Ebert et al, 2005)
Several disadvantages include unlimited liability, which can potentially make all partners liable for one partner’s expenses and a potential lack of continuity when partners die or retire. As well, all of the partners must concur when transferring ownership or selling the firm, unless stipulated legally elsewhere, such as in a partnership document that might give rights to sale to the founding partner. (Ebert et al, 2005)
The option of a limited liability corporation should be recommended to the applicant in this case. This ownership plan offers the benefits of incorporation, namely, having investors who contribute a set amount of funds to the business, as well as incorporating aspects of a partnership into the ownership plan as well. The hybrid nature of this plan makes it ideal for smaller incorporation strategies. (Ebert et al, 2005)
There are numerous advantages to this ownership plan. As with most corporations, investors are only liable for what they invest. Personal property and possessions of the investor cannot be held as liabilities and are not at risk. With its more complex nature, a corporation also has more options for raising initial funds, and the fact that it has numerous shareholders with varying liabilities makes it more likely to be optioned for larger bank loans than either partnerships or proprietorships. Finally, corporations have a potentially unlimited continuity, able to survive their owners and founders by generations. (Ebert et al, 2005)
However, several disadvantages do present themselves, such as complex regulations governing all corporations and the stringent regulations governing the limited liability corporation business ownership option (as well as the S corporation option). Additionally, start-up cost for corporations can be rather high, and corporations are subject to double taxation, a tax on both the income of company profits and the stockholders’ income returned by investment. Finally, corporations stand the risk of corporate takeover, called a tender offer, in which the corporation is sold by the owners against the will of the managers. (Ebert et al, 2005)
The applicant should be advised to establish her business as a sole proprietorship.
This allows her to be the sole owner and member of her business and this ownership plan offers a number of advantages. Firstly, it offers the maximum amount of freedom, both in her personal life and from legal restraints and regulations. It is an uncomplicated ownership plan, easy to formulate and establish, and tax relief and benefit programs are often available for beginning sole proprietors. (Ebert et al, 2005)
Some disadvantages include the total unlimited liability of the sole proprietorship and the business and the fact that the ownership plan only makes available the resources of the proprietor within the business itself. As well, a sole proprietorship has a lack of continuity, and although it can be made into a partnership and/or a corporation at a later date, it can be very difficult for a proprietor to find valid loan corporations willing to invest in such a lucrative offer. (Ebert et al, 2005)
Ebert, R., & Griffin, R. (2005). Business essentials. 5th ed. Upper Saddle River, NJ: Pearson Education, Inc..