Question

Nikki wants to start her own greeting card and postcard business. After looking at the costs associated with starting this business, she decided on using the least expensive form of ownership to set it up. Which of the following choices and reasons would be the least expensive form of ownership for Nikki’s new business?

A-A LLC because it gives her limited liability for the risks her business takes on.

B-A sole proprietorship, because she doesn’t need to draft corporate charters, articles of incorporation and agreements with an attorney’s help.

C-A partnership, because Nikki could have a business partner with which to share expenses.

D-An S Corp, which would mean Nikki is not paying double taxation.

Answer 1

Nikki should choose a B) Sole Proprietorship

Step-by-step explanation:

The least expensive form of ownership for Nikki will be a sole proprietorship. This requires the least amount of admin work and is also the least cost intensive. Establishing a partnership will reduce her cost, but will dilute her ownership and also split her income. And also doesn't give her any form of limited liability either. Under a LLC she will incur registration costs as well as an annual fee, excluding the admin process and incorporation agreements.

Thus it is recommended that she chooses the sole proprietorship option as it will be the easiest and least costly. She can simply conduct business in her own name and will be taxed in her own name. There is no need to register a LLC and incur those costs.