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Best Legal Structure for Stacy's Business

Stacy should form an LLC for her growing business to protect her personal assets from potential liability claims. An LLC combines the liability protection of a corporation with tax advantages of a sole proprietorship. While a sole proprietorship is simple and inexpensive, Stacy would be personally liable for any claims against the business which could jeopardize her personal assets and future of the business as it expands.

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Laura Daquioag
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3 views2 pages

Best Legal Structure for Stacy's Business

Stacy should form an LLC for her growing business to protect her personal assets from potential liability claims. An LLC combines the liability protection of a corporation with tax advantages of a sole proprietorship. While a sole proprietorship is simple and inexpensive, Stacy would be personally liable for any claims against the business which could jeopardize her personal assets and future of the business as it expands.

Uploaded by

Laura Daquioag
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

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1) What kind of legal structure should Stacy adopt for her business, and why? Will

the structure that you recommend address her potential liability? Refer to at least one

of the required or optional readings from the background materials page to support

your answer.

One of the legal structures that Stacy could consider would be that of a sole

proprietorship since she is the sole owner, and she only has two other employees. Under a

sole proprietorship, it is simple and inexpensive to establish a sole proprietorship and there

are no extra tax filing requirements (Roberson-Saunders, P. et all, 2014). However, a great

disadvantage of the sole proprietorship is that you are personally liable for any claims against

you and as such, claims against your own personal assets. Not to mention, the product

liability insurance has become so high that it may not be available to most small businesses,

making you, as a sole proprietor, a risky investment (Duboff, 2004).

As she is concerned about potential liabilities she could be facing in the future and what

it could mean for her business and assets, Stacy should consider the legal structure of an

LLC, also known as a limited liability company. Duboff states that an LLC “combines the

limited liability features of a corporation with all the tax advantages available to the sole

proprietor” (p 14).

As her business is expanding, and considering all her concerns, the LLC (limited

liability company) would be the most ideal choice for her growing business. Stacy can remain

the CEO and manage the daily operations. She will not have to worry about being personally

liable for any claims against her because she will have the protection of her LLC. Maybe

someday down the line, once her business reaches a level where she has more employees,

several assets, and established liability accounts to her name, then she can change her legal

structure.
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