...Sole Proprietorship is a form of business that is owned and ran by one certain individual. That individual is responsible for all the losses and liabilities and is entitled to all the profits from the business. Advantages: Easy and inexpensive to form. Costs are minimal, most of the costs are due to obtaining the proper permits. Complete control of the business. The owner makes all of the decisions. That person is not expected to consult with anyone when making decisions or changes to the business. Easy tax preparation is also an advantage. This form of business is not taxed separately. The tax rates are also the lowest of the business structures. Disadvantages: Unlimited personal liability. Legally there is no separation between you and your business, so you are personally responsible for all the debts and obligations of the business. Many challenges are faced when it comes to raising money for this type of business. Since you can’t sell stock in the business, investors won’t often invest. Also, banks are terribly hesistant to loan money to this type of business for lack of credibility if the business ends up failing. General Partnership is a form of business where two or more people share the ownership of one business. Each partner contributes to all aspects of the business including money, property, labor and skill. In return, each partner shares in the losses and gains of the business. Partnerships entail more than one person when it comes to decision making. It is very...
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...Small Business Idea Paula Boyce University of Phoenix Accounting ACC - 561 Professor Trenda Hackett December 07, 2011 Small Business Idea The government has released fund for creating small businesses. One’s interest is to establish a small business and must determine which of the four forms of business organization will best suit the business chosen. Legal, tax, accounting, and other implications when selecting from the four business types are matters of considerations (University, 2008 - 2011). The four forms of business include Sole proprietorship, Partnership, C Corporation, and S Corporation. Discussion will explain advantages and disadvantages of the four forms of business, financial statement associated with each form of business organization, and the consequences of tax implications, legal implications, and accounting implications such as SOX and FASB. An explanation what one’s business provides, the choice of one’s business organization form, and one’s rationale for choosing the form of business organization chosen (University, 2002). Sole proprietorship advantages and disadvantages Sole proprietorship is the most common and simplest form of business. An individual owns and manages the business and is responsible for business transactions and responsible for debts and liabilities incurred (AllBusiness.com, 2007, p. 1). Advantages of sole proprietorship is the proprietor is in full control of the business, no corporate taxes, legal cost is...
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...Business Structures One of the first steps before starting business should be choosing the proper business structure of the company as each type of business structure will have its own legal and tax implications. The types of business structures include sole proprietorship, partnership and corporation. Sole Proprietorship A sole proprietorship is the most common type of business in United States. This type of business typically consisting of the proprietor and a handful of employees. In Sole Proprietorship business type, the owner of the business is entitled to all profits and handles all your business’s debts, losses and liabilities. The advantages of Sole Proprietorship include complete control of the business, Ease and inexpensive to forming the business and easy tax preparation as Sole Proprietorship is not taxed separately. Disadvantages for this type of business include unlimited personal liability, hard to raise capital and heavy burden as you handle success or failure of the company. Partnership A partnership consists of two or more owners who have joined legally to manage a business. Partners of the business contribute to all aspects of the business, including decision making and raising money for the business. To form a partnership business, all owners enter into an agreement with all the roles and responsibilities of each owner. They also agree on how profits are shared and how ownership will be transferred in case of specified events, such as the retirement...
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...Business Structures Fin/571 Business Structures This week we learned about the different business structures to consider when establishing a business. It is important to note the advantages and disadvantages of each business structure when planning a business. The main business structures include sole proprietorship, partnership, and corporation. Sole Proprietorship Sole proprietorship is a business owned by one person. It is the easiest, least expensive, and least regulated business structure to start. The advantage of a sole proprietor include not having to share the profits or control of business decisions with anyone else. However, the disadvantage is that sole proprietors have unlimited personal liability for the business debts and obligations. Partnership. A partnership business agreement legally formed with two or more owners. The agreement specifies the amount of capital each partner contributes, division of profits, the role of each partner, decision-making process, and transfer of ownership in specified events. The advantage of more than one owner is an increase in capital or borrowing capacity, added knowledge and skills from each of the partners. There are two types of partnerships general and limited. General Partnership-a disadvantage is unlimited liability of all the general partners, partners who manage the daily activities of the business, regardless of the amount of capital each contributed. Limited Partnership- partners, who are not...
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...Legal Structures There are three main types of firms, which include: sole proprietorship, partnerships, and corporations. When starting a business, it is very important to weigh out the pros and cons of each type to decide which type would be best suit your particular business. Each type has its advantages and disadvantages that need to be considered before deciding which would be best moving forward. I will discuss the advantages, disadvantages, and differences of each type of firm. First, there is a sole proprietorship. “A sole proprietorship is someone who owns an unincorporated business by himself or herself.” (IRS.gov, 2016) This type of firm is the easiest to set up and the simplest of the business structures. It is by far the most popular because of its advantages. Some of these advantages include: ease of formation, least amount of record keeping, minimal regularly controls, and advantage of double taxation. With these great advantages comes a huge disadvantage, which is, there is no legal distinction between the assets and liabilities of the business and those of its owner. In a sole proprietorship you may reap all the reward from financial benefits, but you are solely responsible for all business risks involved. In a sole proprietorship if the business fails then that one individual stands to lose all personal assets and other possessions. The second type of business is a partnership. “A partnership is a single business where two or more people share ownership...
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...Business Structures Robin Duuring FIN/571 July 28, 2014 Zhenhu Jin Business Structures There are several business structures to consider when looking at starting a business. Each of structures has advantages and disadvantages. By doing, in-depth research on each structure will allow for the best decision on a business structure. A careful consideration of the organizational structures: Sole proprietorship, Partnership, Corporation, S Corporation and Limited liability company (LLC) are advantageous in helping a business to succeed. Sole Proprietorship Sole proprietorship is the most common business structure. This type of structure is owned and operated by one proprietor. An advantage is that sole proprietorship is a simpler and inexpensive structure to start compared to other business structures. This type of structure is considered a "pass-through" tax entity, where all of the revenues and costs pass through the business to the proprietors, who report their portion of the revenues (or deduct their portion of the costs) on their individual income tax returns (Gaff & Fryzel, 2012). Some more advantages of a sole proprietorship are independence, autonomy, one-decision-maker and an effective management structure ("Sole Proprietorship," 2007). A disadvantage of sole proprietorship is a business and proprietor is one and the same with unlimited personal liability (Gaff & Fryzel, 2012). All pressure of successes and failures is the responsibility of the proprietor. Another...
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...A1a. Sole Proprietorship A business that is owned by one single person is called a Sole Proprietorship. Advantages: Being able to make decisions without consulting a “higher-up,” or any sort of partner in business is one of the main advantages of the Sole Proprietorship. The ability to file the business under the exact identity as the owner is a second advantage of this business form. Disadvantages: Since the business owner is a single person, he or she has to produce the funds for launching and maintaining the business and its operations. Eventual reliance on loans can consume a sole proprietor and the owner can accumulate a lot of debt. The owner’s personal assets and earnings could be comprised due to the “unlimited liability,” facet of the sole proprietorship. The business operations could suffer too, since they rely on the capability of the business owner-which means that if the owner passes away, the business dies with the owner. Characteristics: • Liability: Since all of the business’s earnings belong to the sole proprietor, the owner runs the grave of risk of losing his/her personal assets. The business owner is solely liable. • Income Taxes: The owner of the business and the business itself are considered to be the same entity, the owner of the business reports expenses, loss, and income via schedule C and a standard 1040 tax form. • Longevity: The business will remain in operation until the owner decides to close it down permanently...
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...Differences in Business Forms Angie Anderson University of MN-Crookston The purpose of this paper is to discuss the formation of an accounting firm with another colleague. I will discuss the various types of business structures of an accounting firm and conclude by giving my reasons as to the type of business I will form. Partnership In a partnership, each person contributes in all aspects of the business; including money, property, and all employees of the business. The partners share the profits and losses of the business. When discussing a partnership, it is necessary to consider these issues up front; including how to divide profits, how to resolve disagreements, and if necessary, how to dissolve the partnership. Many partnerships do not need upfront agreements, but it is quite risky to operate without one (SBA, "Partnership"). When forming a Partnership, it is most important to register your business with the state the business will be conducted in. You also need to decide on a business name. Once the business is registered, the business needs to obtain licenses and any required permits. The license and permit required can affect the type of partnership that is formed (SBA, "Partnership"). The three different types of partnerships include: General Partnership, Limited Partnerships and Joint Ventures. General Partnerships mean that all profits, liabilities, and the duties of management are divided equally between the parties involved. A Limited Partnership...
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...to make in starting a business is choosing a form of ownership. This section will lead you through your options and present the advantages and disadvantages of each (Hatten, 2006). When entrepreneurs establish a business, they must decide on the form of business ownership. There are different types of business ownership, and the type that is chosen can affect the profitability, risk, and value of the firm (Madura, 2004). Sole proprietorship, as the simple and easy to form type of business, is a business that is owned by one person. The vast majority of small business starts out as sole proprietorships. Sole proprietors own all the assets of the business and the profits generated by it. Most small business owners prefer the proprietorship because it is simple to enter, operate, and terminate and provides for relative freedom of action and control (Megginson, et al., 2000). On the other hand, partnership is defined as a voluntary association of two or more persons to carry on as co-owners of a business for profit. Like proprietorships, the law does not distinguish the business and its owners. The partner should have a legal agreement that sets forth how decisions will be made, how profits will be shared, how disputes will be resolved, how future partners will be admitted to the partnership, how partners can be bought out, and what steps will be taken to dissolve the partnership when needed. Yes, it is hard to think about a “breakup” when the business is just getting started...
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...Business Structure There are various forms of business structures within the United States and understanding the differences assist in determining which is paramount to the type of business being created. The ranges of structures each vary from one type to another along with positive and negative aspects that should be considered for each entity. “The owners of business usually choose the organization form that will help management maximize the value of the firm.” (Kidwell & Bates, P. 6) A business can form a sole proprietorship, partnership, limited liability company, corporation, or limited liability partnership. A sole proprietorship primary advantage is it owned by one person, who can make all the business decisions for the company as well as keep all the profits. It is the most commonly used form of business in the United States. It is the least expensive to start; however, he or she is also accountable for all the debts and obligations of the company. Additionally he or she has unlimited liability including personal assets. Sole proprietor must have funds to continue the business because it is harder to obtain loans for this business structures. A partnership will consist of two or more owners whom all will be legally responsible for managing the business. Although this format is used less frequently than the other types of business structures, it also has advantages and disadvantages. Each partner will invest funds in the company, and the profits are divided among...
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...Business Structure Advice Rebecca Hardy FIN/571 - Corporate Finance 22 September, 2014 Professor Gurpreet Atwal Dear John Owner, Thank you for allowing my consulting firm to give you the information that you will need to make a sound decision as to the type of business structure that will meet your needs. The three main types of business structure are sole proprietorship, partnership, and corporation. In the next few sections I will explain each type and describe the advantages, disadvantages and tax implications that you would encounter if you selected that type. Let’s begin with the sole proprietorship. Sole Proprietorship The sole proprietorship is the easiest and most cost effective type of business structure to set up, so if funding is a concerned this business structure may be the best route to take. The only cost associated with starting a sole proprietorship the cost of obtaining a business license and the normal startup expenses. With the sole proprietorship the owner is only taxed once on the business’s income. However, one of the major disadvantages of the sole proprietorship is the unlimited personal liability that the sole proprietor faces. In the event that the business cannot generate enough cash flow to pay all of its financial obligations the owner becomes personally liable for all debts. This means that creditors can file lawsuits against the owner’s personal property as well as the business in order to seek repayment for services, loans...
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...Proprietorship Sole Proprietorship is a business owned by one person, as distinguished from a partnership or Corporation. Sole proprietorship is a company, which is not registered with the state as a limited liability company or corporation. Some advantages of a sole proprietorship are that they have flexibility in operations. The sole proprietorship business is undertaken on a small scale. If any change is required in the operations, it is easy and quick to bring the changes. Another advantage in this type is the ease of promptness in decision-making, autonomy. When the decision is to be taken by one person, it is guaranteed to be quick. Thus, the entrepreneur, as a sole proprietor, can arrive at quick decisions concerning the business because he does not have to ask anybody else. There is only one person that makes decisions, therefore, there is no other to criticize, or challenge a decision made. A third advantage is the simplicity of the business. Because of this, it is the most common type of business entity. The only difficulty of this business type is obtaining licenses and permits in the state of operation. If the business will be run under a different name than that of the individual who owns it, a separate special certificate must be filed. Sole Gain is seen as a highly ranked advantage because all revenue goes back to the single investor, the entrepreneur. There are no shareholders to declare dividends. The primary advantage for a sole proprietorship is the single...
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...Business Ownership Name: ACC/561 August 6, 2012 Instructor: Business Ownership The biggest decision an individual can face is with when starting a business is selecting the type of business he has interest in. Will his business be a sole proprietorship, a partnership, corporation, or limited liability company. Each of the four business types has many advantages and disadvantages regarding taxes and liability. The individual who wants to start-up the business should take into consideration many factors concerning cost, control, and the amount of risk he is willing to assume. Sole Proprietorship is the most common type of business. Sole proprietorship is the easiest type of ownership and is the easiest to enter and leave. The benefit to a sole proprietorship is cost of start-up is low, owner controlled, and profits go to the owner. The tax advantages are the individual is not paying separate from his personal taxes the taxes are generally lower for the sole proprietor. The disadvantages of a sole proprietorship are limitless liability, if the business has one owner the business could close if the owner passed away, and it may be hard to raise capital. If more than one individual join to start up a business, the advantages and disadvantages increase. ...
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...entrepreneur. Determining the business structure that best suits the needs of the business owner is a vital step. The type of business structure that a person employs may help to create a solid company, or may lead towards failure. To determine what type of business structure is needed, the potential entrepreneur must look at types of business structures available and decide on which one best suits the company. There are three basic types of businesses; sole proprietorship, partnership, and a corporation. Each offers its own advantages and disadvantages as seen in the table below. The first basic business structure is the sole proprietorship. "A sole proprietorship is a business owned by one person." (Parrino, Kidwell, & Bates, 2012, p. 6) This type of business structure is the largest type in the United States. This type of business structure offers several advantages including simplicity in startup, the proprietor keeps all the profits and has sole decision making authority, and sole proprietorships have lower income taxes versus corporations. However, there are disadvantages as well including sole responsibility for paying the bills and unlimited liability for all debts and obligations of the business. Additionally, the owner's personal wealth will limit the amount of equity capital that may be invested. The last major disadvantage is that transfer of ownership can be difficult as there is not stock or interest to sell. The second basic business structure is a partnership...
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...Report based on case study “ A successful business development”. Contents: 1. Types of business entity 2.1. Explanation of each entity 2.2. Advantages and disadvantages of each type of entity 2.3. Objectives of each entity 2. Stakeholders 3.4. Definition of stakeholder 3.5. List of stakeholders of each entity 3.6. Interest of each stakeholders 3. Organizational structure 4.7. Comparison of two structures presented in the case study 4. Human Resource Management 5.8. The role of HR within the structures presented in case study 5.9. Different methods of HR functions has been delivered of each type of entity 5. Reference 1. Types of business entity In the attached case study we have examples of following business entity: * Section 1: Sole trader * Section 2: Partnership * Section 3: Company: Private Limited Company * Section 4: Public Limited Company Sole trader: Sole trader is an individual who is run his own business. It is a self-employed person who bears risks and losses and takes the profits and the benefits. Partnership: Partnership is type of entity which is organized and managed by at least two people and where all profits and debts are share between the partners. Private limited Company: Private limited is type of business entity which is run and managed by shareholders who has limited liability and shares are exchange privately. There are restrictions define...
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