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Analysis of Business Form Changing
The changing of a business firm refers to a process in which legal structures of a firm may be modified. Currently, the most common forms include partnerships, corporations, sole proprietorships, or limited liability companies. Each form has a set of benefits as well as drawbacks. Changes in business form do not occur in large firms very frequently. However, it is often beneficial for smaller or middle-sized businesses. For example, large growth for a sole proprietorship firm may have them turning into a partnership if a second party assists in the expansion of the business. For instance, an online clothing brand of one owner cna grow in popularity and require not only more labor and capital but additional investments or leadership. As such, a partnership may be the most fitting as it allows for shared profits and additional help without the difficulty of maintaining a corporation or a limited liability company.
A partnership can be beneficial, especially in the aforementioned example, because it is easy to set up, allows for future growth, and is subject to special tax conditions (Stowers, 2022). As such, the firm may make a change to the partnership model to benefit from advantages and reduce difficulties such as sole responsibility, workload, or lack of resources. Large firms such as Microsoft, Warner Bros, and Apple are currently existing partnerships and indicate that a partnership form can be maintained even at a large scale. However, it also facilitates a number of drawbacks such as sharing large business losses, the loss of complete autonomy, potential for personal or emotional issues to affect business operations, and possible complications for selling in the future. As such, the changing of a business form provides a number of advantages but also has the potential to reduce currently existing advantages.
Work Cited
Stowers, Joshua. How to Choose the Best Legal Structure for Your Business. Business News Daily, Web.
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