Sally Gomez is interested in starting a new business. Although Gomez has developed her business plan and is ready to implement her ideas, she lacks the necessary finances to begin her new business. Along with a lack of finances, Gomez worries about the

Question

potential liability involved with starting a new business. Gomez would hate to lose all that she has personally accumulated to date in the event of a successful lawsuit against her. She is considering a sole proprietorship, a partnership, or a corporation as the organizing structure of her new venture. Which type of business would best serve Gomez's needs at this given time?

Answer 1

Gomez would like to operate a business enterprise that limits her liability. In a sole proprietorship, there would be no limitation on potential liability, and Gomez's personal assets as well as those invested in the business would be available for recovery in the event of a lawsuit. A partnership would offer her little protection, as the liability exposure is similar to that of a sole proprietorship. The corporate form would simultaneously afford Gomez limited liability and the means to obtain necessary financing. The financing could be obtained through the sale of shares of stock in her corporation.