Which Type of Business Entity?Since graduating from college five years ago, Ned Turner has...

Which Type of Business Entity?

Since graduating from college five years ago, Ned Turner has worked for a national chain of men’s clothing stores. Ned has held several positions with the company and is currently manager of a local branch store.

Over the past three years, Ned has observed a pattern in men who purchase suits. He believes that the majority of men’s suit purchases are black, brown, blue, gray, and olive. He also notices that French cuff shirts are quite fashionable, but few stores carry a wide color selection. Since he has always wanted to be in business for himself, Ned’s idea is to open a shop that sells suits that are black, brown, blue, gray, and olive and to carry a wide array of colors of French cuff shirts. The store will also sell fashionable ties and cuff links. Ned already has a name for his store, The Three B’s and Go Suit Shop. Ned has discussed his plan with a number of people in the industry and they believe his idea is a viable one.

A new upscale shopping mall is opening nearby and Ned has decided that now is the time to take the plunge and go into business for himself. Ned plans to open the Three B’s and Go Suit shop in the new mall.

One of the things Ned must decide in the process of transforming his idea to reality is the form of ownership for his new business. Should it be organized as a sole proprietorship, a partnership, or a corporation?

What advice would you give Ned? What advantages and disadvantages are there to each choice? The following diagram will help you organize your thoughts.