The owners of a closely held business enterprise face numerous problems
Some are inherent in the organizational structure of the small business an，
~thers exist in enterprises of all sizes. Many problems facing the busines
3wner， such as survival in the business marketplace， are obvious. Other prob
lems， such as the reduction in business income resulting from the loss of a ke
employee due to death， disability， or termination of employment， may not b
recognized by the business owner until the incident occurs.
Many problems facing the business owner can be avoided， or at lea，
mitigated， through proper planning. To plan intelligently to avoid or handl
future problems， it is necessary to identify the potential problems and forr
3bjectives.
The role of the financial services professional is to help business ownei
~r professionals recognize these problems and assist in formulating plans air
propriate for the special needs of each client. The purpose of this chapter is t
discuss typical problems faced by the closely held business owner or profe+，
sional. Possible solutions to these problems will be discussed in subsequer
=hapters.
CHOOSING THE FORM OF BUSINESS ORGANIZATION
Business owners are faced with several choices when selecting the form c
enterprise. They may operate unincorporated， as a sole proprietorship or as
partnership: or incorporated， as a regular (C) corporation or as an S corpora
tion. The choice of ownership form is not irrevocable， and owners of existin
businesses often decide to change the form if circumstances so dictate. Fc
example， the sole proprietor might wonder if the benefits of switching to th
corporate form of ownership are worth the costs of incorporation. Or perhap
the owners of an existing closely held corporation are considering the ta
advantages of a subchapter S election.
The choice of a form of ownership is a complex decision facing all busi
ness owners because it will have a significant impact on the initial start-u
cost， the control and flexibility in management， the taxation of the busines
and individual owners， the ability of the firm to raise capital， and the busines
risks absorbed by the individual owners. Since it is unlikely that any one tort
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