Compare and Contrast Business Structures: Ali Berry's Business

This report provides a comprehensive comparison and contrast of different business structures, including sole proprietorships, general partnerships, limited partnerships, and limited liability partnerships (LLPs). It outlines the key characteristics, advantages, and disadvantages of each structure, such as liability, taxation, ease of setup, and management control. The report also considers the specific case of Ali Berry, a small bakery owner, and recommends a limited partnership structure based on Berry's needs and circumstances, highlighting benefits like personal liability protection, organizational flexibility, and ease of capital creation. The report emphasizes the importance of considering factors like the Canadian context and the specific needs of the business owner when selecting a suitable business structure. The report concludes by referencing several sources used in the research.

Running head: COMPARE AND CONTRAST BUSINESS STRUCTURES
Compare and contrast business structures
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1COMPARE AND CONTRAST BUSINESS STRUCTURES
To: Supervising Lawyer
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Subject: Types of business and what would be suitable for Ali Berry
Before starting the business the owners must decide what type of business entity they
want to establish. The form of a business entity determines which kind of income tax return the
owners want to file1. As the business change and grow, sometimes the owners want to move to a
different type of business structure. There are mainly four types of business structures, sole
proprietorships, partners, limited partners and limited liability partners.
A sole proprietorship cannot be defined as a legal entity as it just refers to as the
individual who owns the business. The owner of the business is responsible for the debts and this
type of business runs under the name of the owner. Sole proprietors register the name of the
business to secure a local license2. The owners of the business can keep the profit because the
persons are personally liable for the business entity. However, a creditor can demand the
personal assets and the business assets to satisfy the debts. The sole proprietor owners can own
the organisation for any duration and they can sell the business. Sole proprietors can pass the
business to their heirs. Sole proprietors should have to comply with the licensing requirements in
Canada. To register the business in Canada, business owners need to register with the territories
and provinces where they want to do the business. The owners will get a unique federal business
number and they will also have a tax account.
Partnership business is owned by two or more individuals. Partnership types of
businesses are inexpensive and easy types to start. In General partnership business, all the
partners need to take the share of profits as well as the losses of the business entity. Moreover,
the partners are jointly and personally responsible for the liabilities3. In partnership types of
business, the financial resources must be combined with the partners of the business. Legal
agreements between the partners should be there. The partnership agreement is important as it
creates the terms of the partnership that would help the individual partner to solve the disruption
in a later stage. In order to register the business in Canada legally, the business must have a name
and it determines the availability of business and register for license, taxes and permits. The
partners need to open a bank account to release the taxes. In case of the general partnership, each
of the partners is personally liable or debts as torts can result from the partnership operation in
business. In general partnership, the partners can be sued for from the performance of the
business.
1 Allen, William T., and Reinier Kraakman. Commentaries and cases on the law of business organization. Wolters
Kluwer law & business, 2016.
2 Segal, Steven P., and Jae-Sung Choi. "Ownership form and quality of care in sheltered care facilities: Chain-
affiliated business vs. sole proprietorship." (2016): 28-37.
3 Erler, Andre R., and W. Richard Peltier. "Projected changes in precipitation extremes for western Canada based on
high-resolution regional climate simulations." Journal of Climate 29, no. 24 (2016): 8841-8863.

2COMPARE AND CONTRAST BUSINESS STRUCTURES
A limited partnership in business exists when two or more than two partners can unite to
continue a business jointly where partners are liable to the extent the amount of money that the
partners invest. Limited partners business does not get dividends; however, they can enjoy access
to income and expenses4. In a limited partnership, one individual can contribute to business
without being associated with the business. In a limited partnership, when two partners go for the
legal agreement, they must hire a lawyer in order to draw up the partnership in a better way. For
the reason of liability, the owners of the limited partners can set up the business with a
corporation like general partners.
In limited liability partnership, the partners should have limited liabilities. Limited
liability partners show elements of partnerships. The main difference between general
partnership and limited liability partnership is that in limited liability partnership (LLP), each of
the partners is not liable for another partner’s negligence and misconduct5. However, in Canada,
LLP is available in some of the provinces; not the whole sections o Canada. Some of the groups
of professionals can enjoy this type of partnership, accountants, lawyers and doctors. For
instance, in Ontario, lawyers and chartered accountants can form LLP. This type of partnership
needs agreements from specific provincial legislation. LLP gives more liability protection to the
partners.
Many of the small business owners opt for the sole proprietorship because it is simple, it
takes nominal cost and it is easy to set up. In case of the sole proprietorship, the owners can
register the business inexpensive way and regulatory burden will be lighter from the side of
owners. The sole proprietors can directly control the decision-making and minimum working
capital is required to start the business. In Canada, the sole proprietors enjoy some of the tax
advantages like sole proprietors can enjoy the small amount loss from personal income and they
can also enjoy lower tax bracket. One of the most important factors in a sole proprietorship is
that the owners can enjoy the direct profit from the business6. On the contrary, sole
proprietorship gives unlimited liability and income is taxable in the stage of personal rate. In
addition, if the owners become unavailable, the business can get dissolved and it is difficult to
create capital on its own.
In case of partnership businesses both a limited partnership and limited liability
partnership, these businesses provide the advantage of fairly inexpensive and easy to create. In
addition, the partners can lessen the start-up cost as the partners can equally share this7. In
addition, partners can get an equal share in the management, assets and profit. The partners can
get tax advantage as it includes the shares of all partners. On the other side, partnerships business
does not provide the legal difference between the partners. The partners may get unlimited
liability and it can be sometimes getting difficult to find the partners who are suitable for the
4 Schell, James M. Private equity funds: Business structure and operations. Law Journal Press, 2017.
5 Pak, Alexey, Lila L. Carden, and Jamison V. Kovach. "Integration of project management, human resource
development, and business teams: a partnership, planning model for organizational training and development
initiatives." Human Resource Development International 19, no. 3 (2016): 245-260.
6 Blake, Allan. Dynamic directors: Aligning board structure for business success. Springer, 2016.
7 Jelsma, Phillip L., and Pamela Everett Nollkamper. The Limited Liability Company. LexisNexis, 2017.

3COMPARE AND CONTRAST BUSINESS STRUCTURES
business. There is a possibility to develop conflict between the partners and the partners are the
economically responsible for business decisions like a contract made and broken.
In addition, limited liability partnership business, the partners can get tax flexibility. In
Canada, the jurisdiction does not make separate entity for LLP for tax purposes at the initial
stage. In Canada, members are treated like a traditional partnership. If the LLP is made as a
corporation, the members of the business entity may elect to file the tax as a corporation. Limited
liability is associated with the less paperwork and LLP provides the member's liability
protection8. The members of the business are not personally liable for debts and it is a good
shield that does not provide in general partnership and sole proprietorship.
Sole proprietorship and partnerships have some common characteristics, as there is no
formal legal need for creating both types of business structures. If the partners or owners of the
business want to hire the staffs or charge the GST from the clients, they need to register the
business with tax accounts. The business owners in sole proprietorship and partners own the
assets and they are considered to be self-employed9. On the contrary, in case of sole
proprietorship, the owners can enjoy the business as autonomy and they have control over the
business, whereas, in partnerships, the partners have responsibilities of daily operation and
management. Sole proprietors do finance the business with savings and a bank loan, whereas in
partnerships, partners share their resources to start the business.
Ali Berry has been running the small bakery successfully by himself and his business is
getting busier. Ali Berry can choose Limited Partnership option where Ali Berry is a Canadian
resident and he is not required for a person to be a limited partner. In exchange for Limited
Partner, limited partners must forfeit some of the managerial powers. There is no minimum
contribution needed in a Limited Partnership and some of the Limited Partnership agreements
many necessitate the additional capital requirement. Ali Berry can pass through taxation where
the loss and profit can attribute directly. Limited Partners structure will provide personal liability
protection. Ali Berry can enjoy the organizational and managerial flexibility. The business'
interests can readily transferrable and the capital can be created through selling limited
partnership interests. In Limited partnership, interests can be transferred and whose structure can
provide for the transfer of share. Ali Berry will be benefitted for this as he can own all business
assets personally and they can share the operational duty. Limited Partnership business has
limited regulation and Ali Berry can maintain separate accounting records for his business as
well as separate income tax return file. If Ali Berry wants, he can end the business at any time as
Limited Partnership provides this provision and Limited Partnership is less expensive to create
than a corporation.
Thank you.
8 Hazen, Thomas Lee, Jerry W. Markham, and John F. Coyle. Corporations and Other Business Enterprises: Cases
and Materials. West Academic, 2016.
9 "Sole Proprietorship, Partnership, Corporation Or Co-Operative? — Canada Business Network". 2018. Canada
Business Network. https://canadabusiness.ca/starting/before-starting-your-business/corporation-partnership-or-sole-
proprietorship/#toc0.

4COMPARE AND CONTRAST BUSINESS STRUCTURES
Reference List
"Sole Proprietorship, Partnership, Corporation Or Co-Operative? — Canada Business Network".
2018. Canada Business Network. https://canadabusiness.ca/starting/before-starting-your-
business/corporation-partnership-or-sole-proprietorship/#toc0.
Allen, William T., and Reinier Kraakman. Commentaries and cases on the law of business
organization. Wolters Kluwer law & business, 2016.
Blake, Allan. Dynamic directors: Aligning board structure for business success. Springer, 2016.
Erler, Andre R., and W. Richard Peltier. "Projected changes in precipitation extremes for western
Canada based on high-resolution regional climate simulations." Journal of Climate 29, no. 24
(2016): 8841-8863.
Hazen, Thomas Lee, Jerry W. Markham, and John F. Coyle. Corporations and Other Business
Enterprises: Cases and Materials. West Academic, 2016.
Jelsma, Phillip L., and Pamela Everett Nollkamper. The Limited Liability Company. LexisNexis,
2017.
Pak, Alexey, Lila L. Carden, and Jamison V. Kovach. "Integration of project management,
human resource development, and business teams: a partnership, planning model for
organizational training and development initiatives." Human Resource Development
International 19, no. 3 (2016): 245-260.
Ritala, Paavo, Arash Golnam, and Alain Wegmann. "Coopetition-based business models: The
case of Amazon. com." Industrial Marketing Management 43, no. 2 (2014): 236-249.
Schell, James M. Private equity funds: Business structure and operations. Law Journal Press,
2017.
Segal, Steven P., and Jae-Sung Choi. "Ownership form and quality of care in sheltered care
facilities: Chain-affiliated business vs. sole proprietorship." (2016): 28-37.