A stock is a kind of security issued by a corporation representing the right to ownership of the business and right to share profits after the payment of all liabilities. Stocks are issued by the business to raise required capital for expansion. Stocks best suited to startup companies that are struggling to run and expand in a competitive market (Forbes, 2010, retrieved from http://www.forbes.com/2010/05/19/small-business-startups-great-ideas-forbes-woman entrepreneurs-funding.html).

Financing with stock brings no new debt to the company. Being the sale of partial ownership of the business, stock financing has no repayment obligation (Resnick, 2007). Debt financing comes with repayment requirements and accrued interests that may lead a startup company bankrupt. However, these risks do not come with stock financing. Funds raised through stocks are available as long as the company exists. In any case, financing with stock creates shares any risks with the investors. Should the startup company fail, the owners do not have to pay the investors the money lost (Shim and Siegel, 2008 p.289).

A new company may have limited loans access. However, financing with stocks increases the borrowing capacity of the business. Common stocks act as securities against losses of creditors. Stocks, therefore, increase the credit worthiness of creditors. On the downside, financing with stock gives away part of the ownership and control of the company.

Partnerships and Sole Proprietorship are relatively simple to form. Forming them does not require formalities with the secretary of state in the state. Also, the profits earned by Partnerships and Sole Proprietorships are taxed only once given that they are accrued to the owners. However, owners of Partnerships and Sole Proprietorships are liable for all debts and civil action against the business.

Limited Liability Companies are also fairly simple to form. Also, they are not taxed at the corporate level and have limited liability. However, Limited Liability Companies can be difficult to transition to publicly traded business. This is evident in case the owners want offer stocking an initial public offering.

In a corporation, the shareholders possess limited liability. However, the formation procedure is long and involves formalities with the state’s secretary of state. Profits in a corporation are also taxed at the corporation and the shareholder’s level.