Legal Issues

When you think about starting any business, the most important thing that you have to decide upon is the business structure you choose for your business. It is important to consider this because this will determine the amount of taxes we will be paying, the documentation that will be done, the obligations and liabilities we face and the way we finance our business operations.

In this situation where we are starting an online business for making and selling craft items through the internet but in many ways the process of formation of an online business is similar to the conventional business venture and the legal structure applicable for the conventional entity is also valid for an online company. Before deciding on a certain business structure we should first look at the business legal structures available to us so that we can analyze them to suit our situation.

The most common business structures that we can follow are
Sole proprietorship is a form of business structure where owner and his company are considered a single entity for tax and liability purposes (Adler  Franczyk, n.d.).

Partnership is a form of legal structure for business where two or more persons are wholly responsible for the obligations of the business. They share in the profits and losses of the business (Adler  Franczyk, n.d).
Limited Liability Company (LLC)is a form of legal structure where the owners of the company are only liable to the amount that they have invested in the business It is more of a hybrid form of partnership because it gives the owners some of the benefits of both partnership and corporation form of structure. (entrepreneur.com n.d.).

Corporation A corporation is a legal entity, separate from its owners (those who are responsible to run the operations of the business).The corporation pays taxes and is legally liable for its liabilities and obligations. The owners benefit from this form of business structure by avoiding personal liability, but the cost of setting up a corporation offsets many of its benefits.
             
 Based on the above analysis, we need to evaluate our decision, on the type of
               
Our business structure against the following criteria                          
Legal liability We should consider whether we can meet the liabilities and obligations that arise from the operations of the business. If we want to avoid any obligations occur from the potential losses of the business than the partnership and sole proprietorship is not the best option for us.

Cost of formation and ongoing administration There is a lot of high cost associated if we choose to incorporate, though the tax options and benefits we can avail if we decide to form a corporation are far greater than what will be available to us if we choose a partnership business structure. However, this tax benefit cant be enough to offset the high running cost of corporation .Moreover, the high costs of record keeping and paperwork associated with incorporation makes it an unviable option for us.

Future needs We also need to consider the long term issues related to our business. Because the partnership and sole proprietorship may offer greater benefits and rewards as compared to the other form of business structures, but it has risks like sustainability issues. We should be mindful of the fact that our business needs to survive when the owners are no longer available.

We need to consider whether we will be able to meet the financial needs of the business on our own, because if we decide to form a partnership business structure we two will be solely responsible to raise finance. A corporation is considerably in a better position to meet it financial and investment needs through issue of shares and etc.

Another question we need to ask ourselves is, What will be the fate our company when we both or either one of us is no longer around to run it (entrepreneur.com n.d.).
                 
4. Flexibility Partnership form of structure offers more flexibility as we will be in a better position analyze our personal needs.While corporate presents many complexities with regards to the decision making about the strategic needs of the business.

The above analysis suggests that general partnership type of business structure will be best suited for our internet business because it gives us the opportunity to take control of our business, reaping all the rewards to ourselves while being responsible for all the liabilities and obligations that arise from the business.