The legal requirements to starting a small business in Arizona Research Paper

The legal requirements to starting a small business in Arizona - Research Paper Example The fact that it is placed 39th in the country with respect to per capita income with an average person earning about $40,830 proves the support entrepreneurs enjoy in this part of the country. Therefore, the legal requisites to be satisfied while setting up a new business are designed to support new business ventures while ensuring safe and smooth transactions (â€Å"CIA – The World Factbook†). Basic business structures: Sole proprietorship vs. partnerships: An important question to be answered before setting up a new business is how the enterprise is to be structured. Based on the specifics of the business, one can choose to be the sole proprietor or include a number of partners in the business. Sole proprietorship, as a model of business, can be efficient when the enterprise is in its initial stages and the responsibilities within the organization are equally distributed among the staff. However, irrespective of how well-organized an enterprise is, a single owner has too much at hand and this overload of work can seriously hinder the growth of the enterprise in the long term. The owner has to take care of all aspects of the business and manage them alone. Hence, in such cases, business partnerships are more suitable compared to sole proprietorship in many ways. One does not have worry too much about debt liabilities, legal compliance and different responsibilities since every burden is now distributed among the partners. While partnerships are a great way to raise capital, they too come with disadvantages. As the saying goes, two people can be company whereas three becomes crowd. Hence, as the number of partners increases, so does the difference in opinions and disagreements. Therefore, it requires a patient and strong character to manage a partnership with minimal disagreements (â€Å"Business formation†). Corporation: A corporation takes a different approach in forming a business. Legally, it is a unique entity and is separate from the owners. It can enter into contracts and is taxable. The owners normally own a number of shares in the company. A board of directors chosen by such shareholders is responsible for every policy and decision taken on behalf of the corporation. A unique characteristic of this business model is that a change in the ownership does not affect the corporation. Moreover, in this model, every shareholder has a limited liability towards the debts of the corporation and any legal action taken against the corporation. Raising capital is relatively easy since it can be accomplished by selling the stock. However, forming a corporation needs more time and monetary resources. The tax too is higher than other business models. And since a number of federal, state and local bodies monitor these corporations, extensive paperwork is required in order to ensure that all regulations are followed (â€Å"Business formation†). LLC: An LLC (Limited Liability Company) is a hybrid business model which in corporates the best features of a corporation and those of a partnership. It combines the limited liability concept of a corporation with the tax efficiency and the ease of operation of a partnership. However, forming an LLC is more formal and complex compared to a partnership. The owners are also treated as members and the lifetime or duration of an LLC is normally fixed when the papers are filed. This duration can be extended on an as-required basis with the vote of members during expiration. An LLC is also limited in its inclusion of the characteristics of a corporation. At any time, it cannot incorporate more than two of the following four features which define a corporation: Centralized management, Limited Liability, extension of life, and the ability to transfer ownership