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Tilly Case Analysis

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Tilly has developed a business plan to start her business and is deciding on the structure and how she will finance the start up. Additionally, Tilly would like to structure her business in a way to protect her personal assets,
“A sole proprietorship is the most common form of business organization. It’s easy to form and offers complete control to the owner” (www.irs.gov). A sole proprietorship is one of the business structures mentioned as an option for Tilly. A sole proprietorship would be the easiest and the least expensive to form. Tilly would have complete control over the business decisions. Tilly is worried about liability in general and losing what she has personally accumulated to date, Because of her worries, a sole proprietorship …show more content…

A corporation would provide protection for Tilly’s personal liability and assets. “If you organize your business as a corporation, you are generally not personally liable for the debts of the corporation” (www.irs.gov). In addition, a corporation would enable Tilly to raise capital with the sale of stocks. Both of these advantages would address Tilly’s main concerns over the personal protection of assets and financing. The main disadvantages to a corporation are the complexity to include federal, state and local regulations. In addition, taxes could be more complex. “It may require more tax preparation services than the sole proprietorship or the partnership” …show more content…

An LLC “combines the best aspects of partnership and the best aspects of corporations: it allows all its owners (members) insulation from personal liability and pass-through (conduit) taxation” (Warner, et al. 2012, p. 633). For Tilly, this choice would directly address her concerns regarding protection of her personal assets. “Members are protected from personal liability for business decisions or actions of the LLC. This means that if the LLC incurs debt or is sued, members' personal assets are usually exempt” (www.sba.gov). Other members would bring in their own capital or assets to help with the financing of the business. In addition, this structure allows for an individual or group to form the business; “most states also permit “single member” LLCs, those having only one owner” (irs.gov). The main disadvantage to an LLC is if a member leaves, the remaining members must dissolve the business and fulfill all remaining legal and financial obligations (sba.gov). In addition, taxes are generally treated like that of

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