Starting a new business is a complicated process covering identification of the most appropriate legal structure; selection of the necessary business form requires balancing all strengths and weaknesses from a legal point of view in order to simplify further company activities. The idea to open a Pilates Studio franchise needs a thorough analysis of various legal forms in order to understand the principles of business structures work and chose the one meeting all requirements.
Business structure analysis covers the following legal forms: Sole Proprietorship, General Partnership, Limited Partnership, Corporation, Limited Liability Company and Limited Liability Partnership. It should be noted that most small businesses stick to the choice of a sole proprietorship or, sometimes partnership; the basic reason for this is connected with low price and simplicity of business running and maintenance. Legally, the owner and the business are considered to be the same person in sole proprietorship; the trader usually has no limited liability being completely responsible for the business debts. In the case of Partnership, legal relationships are set out covering the points of profits sharing, partners’ responsibilities and other financial aspects. The basic advantage of the two analyzed legal forms is connected with the fact that business owners report losses or profit in accordance with their personal tax return, though they are liable for all debts personally. As for Limited Partnership, business partners are not completely involved in the management and as a result, they have limited liability for debts of business operations; besides, this legal structure allows partners to raise cash without any involvement of outside investors, but this form is more expensive to create than General partnership.
Corporations and LLC are complicated business structures from a legal and financial point of view. The difficulties can be connected with the tax system and financial regulations; though the principal advantage lies in the fact that owners have limited liability in debts even in the case of management participation. These legal structures require investments for development and are complicated by burdensome paperwork. Besides, the latest federal tax alterations may not be reflected by state laws. In a Limited Liability Partnership, the malpractice does not require liability of all the partners; this form is beneficial though it is not available in all the states and covers a limited professional list.
Pilates Studio franchise is to be created and developed on the basis of a sole proprietorship or general partnership. This business is aimed at providing classes doing pilates; so, it does not require sophisticated management and accounting introduction, but simple legal registration and little investments (Cheeseman, 2007).
Modern business organizations operate in accordance with legal and tax system influence on business running process. Companies and corporations are to reflect their tax changes and pass a number of Acts reflecting business affairs conduction. Domestic factors play an integral part in business creation and functioning; it can be explained by state prohibitions and limitations concerning different obligations of its owners; for example, in PLLC (Professional Limited Liability Company) all the members are to belong to one profession, or, in case of property transference to the corporation, it is to stay there and move to another nonprofit if the corporation ends. Such legal and domestic terms are frequently faced by modern corporations and joint ventures; they usually differ in accordance with state law peculiarities and must be compulsorily followed by business owners.
References
Cheeseman, H. R. (2007). The Legal Environment of Business and Online Commerce: Business Ethics, E-Commerce, Regulatory and International Issues. 5th Edition, Pearson Prentice Hall.