This paper examines the three primary forms of business organization — sole proprietorship, partnership, and corporation — in the context of launching a new mobile photographic studio. The paper outlines the concept behind the business idea and then evaluates each structure's advantages, disadvantages, and tax implications. Drawing on foundational accounting and business law sources, the analysis concludes with a recommendation for the most appropriate structure given the business's size, single-owner nature, and startup constraints. The paper provides a practical framework for any entrepreneur weighing organizational choices at the outset of a new venture.
The paper demonstrates comparative analysis applied to a decision-making context. Rather than simply describing each business structure, the author evaluates them against specific criteria relevant to the scenario — startup cost, liability exposure, capital-raising ability, and tax reporting complexity — before synthesizing those findings into a justified recommendation.
The paper opens with a brief description of the business concept, establishing context for the analysis. It then systematically covers each of the three main business structures in dedicated subsections, each following the same evaluative framework. The final section applies the analysis to the specific business scenario and delivers a clear, reasoned recommendation. This structure mirrors a standard business report format appropriate for undergraduate accounting or business law coursework.
The business concept under consideration is the establishment of a mobile photographic studio. Many individuals want family portraits or photos for identification and other purposes but do not have time to visit a professional photographer.
There are already a number of services where photographers set up in shopping centres to take family portraits or photographs of children, or travel to schools to photograph children and sell prints to parents. The new idea takes this a stage further, allowing a family to invite a photographer into their home for a set period of time at a set price that includes a specific number of photographs. The convenience and high quality of service will create differentiation, with the aim of gaining business through recommendation. The business will be established in an area with a large population of middle- and upper-class families where a similar service is not easily identifiable.
In order to set up the business, it is necessary to consider the practical implications associated with the different business structures that may be used to establish the firm.
When setting up a business, the idea itself is only part of the process. It is also necessary to consider the way in which the business will be structured in order to function. There are three basic structures that may be used: sole proprietorship, partnership, and corporation (Weygandt et al., 2011). Each of these structures carries implicit advantages and disadvantages. In order to assess which will be best suited to the new business idea, each structure can be examined in turn, including its tax implications.
The first structure to be examined is the sole proprietorship. This is a very simple structure in which the business has a single owner who sets up and runs the business (Weygandt et al., 2011). The owner is self-employed and the business is an extension of the owner. This structure is commonly seen in the early stages of a business because it is easy to set up; it is also common among small businesses, especially "one-man band" operations such as those of an independent plumber or electrician. The business is inherently linked with the owner, as it does not have any separate legal identity (Weygandt et al., 2011).
The primary advantage of this structure is that it is very easy to set up, requiring only that the owner begin operating and inform the relevant authorities — such as the tax office — of the startup. It is also a structure that is very easy to dissolve. The cost of setting up and maintaining a sole proprietorship is relatively low. The profits from the firm are entirely the property of the owner, and the owner can choose how to use or spend those profits.
However, the inherent link between the owner and the business is also a major disadvantage. Because the owner and the business are inseparable, the owner has 100% ownership of the assets but is also 100% liable for the business's liabilities (Weygandt et al., 2011). If the business fails, the owner remains responsible for liabilities such as loans and other debts. This unlimited liability creates a potentially high level of risk: if the business assets are insufficient to repay debts, the owner must use personal assets. Raising capital for a sole proprietorship is also challenging, as it is the credit position of the individual — rather than the business — that will be assessed by lenders.
The tax implications are relatively straightforward. Because the business does not exist as a separate entity from the proprietor, it does not maintain its own tax records. The profits from the business are assessed as the owner's individual income; the income and expenses of the business are shown on Federal Tax Schedule C, and profits are reported on Federal Tax Form 1040. The business is private, and as such the Sarbanes-Oxley Act (SOX) and FASB regulations are mostly inapplicable.
You’re 42% through this paper. Sign up to read the remaining 3 sections.
Sign Up Now — Instant Access Already a member? Log inAlways verify citation format against your institution’s current style guide requirements.