Business Entity Matrix
Selecting the type of business entity is an important decision for any business that determines the liability of owners and structure of the business. The business is looking to sell pet treadmills domestically and eventually internationally. Using market research on the potential demand as a determining factor, the business will look to assess the sales capabilities of the company. Every company must evaluate all the advantages and disadvantages of each type of business to select the most appropriate for a business venture. A Limited Liability Company (LLC) is the best option for forming a new pet treadmill business because of the liability concerns and the advantages of the LLC over other types of business.
Type of Business Entity
A LLC is the best type of business entity for this new business venture. The advantages of forming of an LLC are members receive limited liability and have pass-through taxes where earnings are treated like those in partnerships or S Corporations. Forming an LLC instead of a corporation provides the benefits of forming a corporation but limits a few of the disadvantages. A primary benefit is LLC members are not responsible for the debts and liabilities of the company. In this situation, one can invite two rich friends to be the members of the LLC and will not have to personally guarantee the debts incurred by the business. Moreover, forming a LLC may help a new business establish credibility with potential customers, employees, vendors, and partners. Based on the plans and projections for the business, the most suitable type of business entity is an LLC.
Liabilities of Limited Liability Company
Members of Limited Liability Companies have limited liability for the obligations of the LLC. However, s ...