ADM 477 IWU The Best Form of Business Ownership & Sole Proprietorship Analysis

If you have ever thought of starting your own business, you know how important it is to select the most appropriate business type to meet your needs. The sole proprietorship is by far the most popular type of business organization, because it is inexpensive, easy to form, and does not require formal incorporation. A sole proprietorship is still subject to various types of regulations, however. For example, you may have to register your trade name with the state, secure local business licenses, and collect both local and state sales taxes.

The idea of being one’s own boss is what makes the sole proprietorship so appealing to entrepreneurs. The major downside to owning a sole proprietorship is that you are personally exposed to unlimited personal liability. The sole proprietorship is not a legal entity, so it cannot be sued. So you could lose not only your business, but all of your personal assets, too, to satisfy a court judgment against your business.

One viable way to protect your personal assets is to purchase comprehensive business liability insurance. Insurance plans can be customized to fit your business needs. Insurance companies offer all kinds of sole proprietorship insurance policies. General liability policies cover everything from personal injury and property damage, to worker compensation, and cyber breach insurance.

Upon successful completion of the course material, you will be able to:

Compare the advantages and disadvantages of operating a business as a sole proprietorship.

Explain the advantages and disadvantages of operating a business as a limited liability company.

Resources

Website:

U.S. Small Business Administration

Video & Transcript:

Beyond Food Carts

Background Information

The many different forms of business organizations are a reflection of the United States’ expansive business environment. Some businesses operate as sole proprietorships, while others incorporate. The decision to choose one business entity over another often is tied to business risks and financing concerns. Because of the risks associated with unlimited liability, sole proprietorships are notoriously hard to fund. Sole proprietors have a very hard time securing capital from investors or loans from banks. Therefore, entrepreneurs often seek alternatives, such as a member-managed limited liability company.

The limited liability company is a separate business entity. Therefore, liability is limited to the amount an entrepreneur has contributed to the business. With a limited liability company, an entrepreneur can retain control over the day-to-day operations by designating himself or herself as the acting manager. The entrepreneur also can include a provision in the operating agreement that prevents fellow members from removing him/her from the LLC without consent. Its limited liability status means that it is easier to attract investors.

Instructions

Review the rubric to make sure you understand the criteria for earning your grade.

View the videos available on the U.S. Small Business Administration website to learn more about the process of outlining and developing a business plan. Developing a business plan can actually help an entrepreneur better decide what type of business structure best fits his/her needs.

View the video “Beyond Food Carts.”

Transcript for the video.

By definition, a sole proprietorship is an unincorporated business owned by one person known as the sole proprietor. The majority of U.S. businesses are owned and operated as sole proprietorships.

Write a one- to two-page letter advising a hypothetical sole proprietor to choose another form of business ownership. Explain why he or she should convert the sole proprietorship to another form of business ownership (for example, a traditional “C” corporation, an “S” corporation, or a limited liability company).

2/7/22, 12:50 PM
Preview Rubric: Course Assignments – 4WI2021 Business Law (ADM-447-01B) – Indiana Wesleyan University
Course Assignments
Course: 4WI2021 Business Law (ADM-447-01B)
Criteria
Content
Level 4
Level 3
Level 2
Level 1
30 points
25 points
20 points
15 points
(26–30 points
possible)
(21–25 points
possible)
(16–20 points
possible)
(0–15 points possible)
You address all of the
requirements of the
assignment.
You address most of
the requirements of
the assignment.
You address some of
the requirements of
the assignment.
You address few or
none of the
requirements of the
assignment.
You display excellent
organization.
You display very good
organization.
You display good
organization.
You do not display
effective organization.
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Criterion Score
/ 30
1/3
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Criteria
Critical Thinking
Preview Rubric: Course Assignments – 4WI2021 Business Law (ADM-447-01B) – Indiana Wesleyan University
Level 4
Level 3
Level 2
Level 1
20 points
15 points
10 points
5 points
(16–20 points
possible)
(11–15 points
possible)
(6–10 points possible)
(0–5 points possible)
You demonstrate clear,
insightful critical
thinking when you:
You demonstrate
competent critical
thinking when you:
You demonstrate
limited critical thinking
when you:
You demonstrate little
or no critical thinking
when you:
Examine key
issues.
Scrutinize the
meaning of the
information.
Apply relevant
criteria to the
problem or
issue.
Describe key
issues.
Describe the
content of the
source
materials.
Describe the
meaning of the
information.
Define the
criteria and
reasoning used
to make
judgments.
https://brightspace.indwes.edu/d2l/lp/rubrics/preview.d2l?ou=158670&rubricId=488082&originTool=quicklinks
Mention key
issues.
Record the
content found
in the source
materials.
Identify
potential
meanings of the
information.
Identify criteria
used for making
judgments.
Criterion Score
/ 20
Do not raise key
issues.
Miss key source
materials.
Ignore or
misrepresent
the meaning of
the information.
Do not use
criteria or use
invalid criteria
for making
judgments.
2/3
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Criteria
Grammar, Spelling,
Length, and
Citation
Preview Rubric: Course Assignments – 4WI2021 Business Law (ADM-447-01B) – Indiana Wesleyan University
Level 4
Level 3
Level 2
Level 1
10 points
7 points
4 points
2 points
(8–10 points possible)
(5–7 points possible)
(3–4 points possible)
(0–2 points possible)
Your sentence
structure is complete,
with correct spelling,
punctuation, and
capitalization, and
varied diction and
word choice.
Your sentence
structure has minor
errors (fragments, runons), with correct
spelling, punctuation,
and capitalization, but
limited diction and
word choice.
Your sentence
structure has several
errors in sentence
fluency, with multiple
fragments/run-ons and
poor spelling,
punctuation, and/or
word choice
Your sentence
structure has serious
and persistent errors in
sentence fluency,
spelling, punctuation,
and/or word choice.
Your assignment
length is correct, with
minor errors in APA
formatting.
Your assignment
length is inadequate,
with several APA
errors.
Your assignment
length is correct, with
correct APA
formatting.
Total
Criterion Score
/ 10
Your assignment
length is inadequate
with several APA
errors.
/ 60
Overall Score
Total Points
0 points minimum
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3/3