...| Sole Proprietorship | Description | Sole proprietor is most common way of doing business owned by single owner not incorporated. | Two Advantages | Easy to create. No time or costs simply start doing business.Autonomy owner is the business. Easy to make decisions. Own hours, grow as big or stay little. Owner decides. | Two Disadvantages | If owner dies business dies. Only one person hard to raise capital.Because it is one person, if you don’t have individual wealth the business will have to suck funds from somewhere else. | Liability | Owner is 100% liable for the business, no difference between owner finances and business finances. | Income taxes | Taxes are same as owner/business. You would pay taxes through owner’s income. Taxes are one in the same. | Continuity of the organization | Easy to start, easy to shut down just finish all contracts pay off all debt and you can close down. | Control | Owner has all control on decisions. Owner may need to get local license and permits and operate within the law of the City, State, or country. | Profit retention | Would be managed through the owner’s personal finances and set up however they see fit to retain profits. | | General Partnership | Description | Where two parties agree to go into business together. Often times taking different talents to add to the business. Similar to a Sole Proprietorship but two or more people. | Two Advantages | Two skill sets, two individual bank accounts. No formal or stated...
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...report) Forms of Business Organizations SOLE PROPRIETORSHIP A sole proprietorship is an unincorporated business entity owned by one person. A sole proprietorship is the most common form of business today. · Liability: This is one of the largest disadvantages of a sole proprietorship. There is no distinction made under law between the proprietor and the proprietorship therefore the proprietor is one hundred percent liable. In the event that the business flops or is sued the business and personal assets of the proprietor including homes, bank accounts, vehicles, and equipment will be used to pay off outstanding debts. Future earnings are included the only income that is exempt from liability are life insurance monies left by the proprietor to his/her family. · Income taxes: There is no difference under the law between a sole proprietor and the sole proprietorship, meaning that all business income is considered personal income of the proprietor. There is no double tax; all taxes are paid once by the proprietor since there is no separate reporting of federal income tax. The disadvantage to the tax situation is that the proprietors’ income from the proprietorship may cause the individual to enter a higher tax bracket and therefore pay more taxes. However a sole proprietor may decrease taxable income by writing off operating costs as expenses and most often this tax situation is advantageous. · Longevity/Continuity: It is as easy to dissolve the business as it was to start...
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...and/or local laws affect ting the type of business, and Dissolution. Different forms of business are customized to suit corporations due the amount of liability that is spread throughout the business. One form of business may be a safer and more profitable alternative because investors can invest with low risk. For example, a sole proprietorship is the simplest form of business. It refers to a person who owns a business and is personally responsible for the debt of the business. A good sole proprietorship scenario would be an entrepreneur selling baseball caps out of the back his or her automobile. The sole owner is personally held accountable for anything that may go wrong with the business but the likelihood of this occurrence is low due to the fact the store is on wheels. The major disadvantages of this form of business are creditors can bring lawsuits against the business owner for the debt of the business. The owner earns the income so the owner files a Schedule C and a standard Form 1040 and receives the bottom line amount in their personal tax return. Legally, sole proprietorships have the simplest structure but they also lack many of the protections that other business form have. The business has no separate existence from the owner. In the event of crisis or bankruptcy, the owner is personally responsible for compensating any employees. The dissolution of a sole proprietorship occurs when the owner decides it is time to, death of the owner, or bankruptcy of the business...
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...Sole Proprietorship: is an unincorporated business that is owned by one person, the sole proprietor. An advantage of a sole proprietorship is that there are very few formal requirements for the creation, operation, and termination of the business. The sole proprietor may employ as much or as little capital as he or she sees fit and run the business as they so desire. Additionally all the profits are those of the sole proprietor. With that stated, the losses are also those of the sole proprietor. Since there is no separation in the legal entity between the proprietor and the business, all personal assets become attached to the debt of the business. Another disadvantage can come at the time, or untimely of death of the proprietor. There is no automatic continuation of the business. The business becomes part of the owner’s estate and can become subject to probate and “death tax”. • Liability- You risk everything, there is no legal separation between the business and the individual owner. The owner risks all assets, home, car, everything in his/her name. Unlike a corporation, sole proprietorships have unlimited liability and the proprietor is legally responsible for all debts. • Income Taxes- All business related income or losses must be reported on the owner’s personal income tax return. The business is not separately taxed. Deductions are allowed for business expenses in the same manner as any other type of business. The owner is paid simply by making draws...
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... They are usually run by a single person, the owner, or run by a very small staff. • Liability: The owner is liable for all debts accrued by the business. This means creditors are entitled to recoup and debts through business and personal assets. • Income taxes: A sole proprietor files their business taxes along with their personal taxes. Typically when filing taxes the form that is files is the 1040. The owner would just need to file a Schedule C form along with their 1040. • Longevity or continuity of the organization: In the event that the owner dies normally the business dies also. Unless the owner has a qualified heir to pass the business to it will cease to exist. 2 • Control: As stated above, typically sole proprietorships are completely autonomous. The owner has total control over day to day operations. He also has to final word on all decisions associated with the business. • Profit retention: The owner keeps 100% profits gained. • Expansion / Location: To expand or relocate business the owner only needs to make sure they obtain any licensing or permits required by local or state law. Also, if operating in a name other than their own, they must make sure the business name is legally available for use. GENERAL PARTNERSHIP A general partnership is where there are two or more that own a business with equal powers. To establish a partnership there must be a oral or written contract between all parties. To protect each partner should any issues...
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...To: Business Owner From: Justin Lugar Date: November 4, 2015 Subject: Business Form Recommendation It seem as though the you are looking for a couple distinct business characteristics for improving areas of concerns you have for your, so far, promising business venture. Since you are now operating in a sole proprietorship, which allows business and personal finances to be one in the same, one worry is not having enough liability coverage to protect your personal assets/finances in unforeseeable lawsuits. Another concern is the being able to raise enough investments in capital assets to be capable of expanding your business. Right now you are not being double taxed, meaning at the corporate level as well as the personal level. Since there is a sole proprietorship going on taxes are only taken out at the personal level, saving you, as the owner, a substantial amount of profit. It is likely that this is one benefit you would like to keep in order to maximize your earnings. Based on the type of business you are seeking to operate I would recommend changing from the sole proprietorship to a Limited Liability Company (LLC) and I will explain why. To sum up what Http://www.referenceforbusiness.com/small/inc-mail/limited-liability-company.com states, the LLC offers the members (owners) protection from business liabilities that might be incurred. This means that they are not personally liable for paying any of the company’s debts beyond what they have invested in the company....
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...and explain those decisions to the people who report to them. Understanding corporate finance gives managers the information they need to inform and motivate others. There are three main forms of business organization are: sole proprietorships, partnerships, and corporations. They may start as a sole proprietorship or partnership and evolve into corporations as they grow. The proprietorship has three important advantages: it’s easily and inexpensively formed, it’s subject to few government regulations, and the business pays no corporate income taxes. The proprietorship also has three important limitations: it’s difficult for a proprietorship to obtain large sums of capital, the proprietor has unlimited personal liability for the business’s debts, and the life of a business organized as a proprietorship is limited to the life of the individual who created it.The major advantage of a partnership is its low cost and ease of formation. The disadvantages are similar to those associated with proprietorships: unlimited liability, limited life of the organization, difficulty of transferring ownership, and difficulty of raising large amounts of capital. The tax treatment of a partnership is similar to that for proprietorships, which is often an advantage.The corporate form of business has three major advantages: unlimited life, easy transfer of ownership interest, and limited liability. While the corporate form offers significant advantages over proprietorships and partnerships...
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...Running Head: LEGAL UNDERPINNINGS OF BUSINESS LAW Legal Underpinnings of Business Law BUS 670: Legal Environment Instructor: January 2, 2014 This assignment will fall on the presumption that I own a business, and it falls into one of the five different categories and company names as follows Tinker’s Home Security Service (sole proprietorship), Tinker & Tailor’s Home Security Service (general partnership), Tinker & Tailor’s Home Security Service (LP), Tinker & Tailor’s Home Security Service, Inc. (corporation), Tinker & Tailor’s Home Security Service, LLC (LLC). Furthermore, this assignment will focus on the fact the businesses are being sued for breach of contract and from there I will list each business and compare and contrast my liability exposure as the owner of the business in the lawsuit. Next for each of the business entities I will analyze how I might limit my liability exposure as the owner. Lastly, this assignment will cover the best business organizational form in the business; I previously described, which will include my personal liability exposure, management, taxation, and the ease of formation of said business. Compare and Contrast my personal liability exposure | Liability Exposure as Owner | Limiting Factors | Tinker’s Home Security Service | Sole Proprietorship | "The sole proprietorship is not recognized as a separate entity from its owner; as a consequence, the debts of the business are deemed to be the personal debts...
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...written notice of such default to the defaulting Partner. The defaulting Partner shall have fourteen (14) calendar days after such notice is sent to cure such default. If the defaulting Partner fails to timely cure such default, the Partner that is then entitled to purchase the defaulting Joint Venturer’s share in the Partner may invoke, in addition to any other remedy at law, the sale of the defaulting Joint Venturer’s interest in the Business Cooperation as stated in paragraph 9.02. 10.02 Sale Notice. Sale Notice. Notwithstanding the written offer requirement of the selling Partner in paragraph 9.02, if the defaulting Partner fails to make the required written offer to sell his interest within five (5) days after the expiration of the cure period, any non-defaulting Joint Venturer’s that is entitled to buyout the defaulting Partner may send written notice of intent to purchase the defaulting Joint Venturer’s interest in the Business Cooperation and the defaulting Partner shall complete the sale within thirty (30) days after such notice is sent. ARTICLE XI REPRESENTATIONS AND WARRANTIES 11.01 Each Business Cooperation hereby represents and warrants to each other the following matters: Each Partner has the legal power, right, capacity and authority to enter into this Agreement. However ABC COMPANY IN CHINA does have the right decisive vote in all matters in the project gathering and planning. All requisite action (corporate, trust, partnership or otherwise) has been taken...
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...always been the company’s foundation or structure. There are many structures for a business that will provide both advantages and disadvantages. This paper will discuss each structure. Business Structure There are three types of business structures, partnership, sole proprietorship and a general corporation. Each structure has its disadvantages and advantages but the key is doing the research to determine which business structure will be suitable for your business venture. Many people may not be interested in running a small business so a sole proprietorship may not be the favorite structure to start with, or maybe when starting a business you may want your company to start small but eventually run as a corporation. Whatever the case may be one must understand the advantages and disadvantages of each structure. Sole Proprietorship The most inexpensive and easiest way to get a business started is a sole proprietorship. The sole proprietorship business structure allows for a business owner to have complete control over decision- making in the company. Along with no corporate taxes, there is minimal startup costs when creating a sole proprietorship compared to other business structures as well as few business requirements. One major disadvantage of a sole proprietorship is that the business owner is held personally liable for all obligation and debts that the company may occur. If the business begins to fail and the...
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...Legal Forms of Business The decision to decide on what type of business organization to select for the situation to be most successful can be difficult because it is hard to predict the future on how things will unfold. With seven different forms of business to choose from and all with specific advantages to polices, financial structure, and risk it is important to know the advantages and disadvantages. Each situation has a preferred choice and liability and one or two plus people must research and justify why they prefer the corresponding business form. Sole Proprietorship “The sole proprietor is an unincorporated business with one owner who pays personal income tax on profits from the business. With little government regulation, they are the simplest business to set up or take apart, making them popular among individual self- contractors or business owners (www.investopedia.com).” A Sole Proprietorship is the simplest, most common, oldest form of business to be owned and operated. This form of business is most times fairly small and viewed as excellent for first time business owners and because of the few legal requirements or documents needed. In this type of business there are usually traditional things that customers see on a day to day basis. For instance, the owner or manager greeting people at the door or organizing things to attach the business to the society, towns, or neighborhoods around them. “The benefit of the sole proprietorship is the tax advantage...
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...most often selected by individuals starting new businesses. It is generally defined as a business completely and directly owned and operated by one person. To create a sole proprietorship, you need only obtain whatever licenses, if any, are necessary to begin operations; few legal formalities are required to start, and it is usually less expensive to establish than a partnership or corporation. The sole proprietor, as sole owner of all assets, is entitled to all profits, but must also shoulder all of the venture's liabilities and operational losses. The major sources of funding are the proprietor's personal assets, the money generated by the business, or borrowing. Some of the major advantages of a sole proprietorship are, ease of formation, owner receives all profits, owner has full control and final say on all matters, as well as special taxation benefits. The disadvantages of a sole proprietorship are limitless legal as well as financial liability, unsteady life of business, and less access to capital then other forms of business. * Liability: In a sole proprietorship the owner has unlimited as well as unshared liability due to the fact that there is no legal distinction between the owners business assets as well as his personal assets. In the case of the owner defaulting on loans or bankruptcy, the owner must use his own personal funds and assets to pay back the creditors if his business assets are not sufficed to cover the debts. * Income taxes: All the income and expenses...
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...Business Entity Matrix Blake M. Reimert LAW/531 Beverly Spencer October 1, 2012 Business Entity Matrix |BUSINESS |Formation |Control |Liability |Continuity |Taxation | |Entity | | | | | | |Partnership | A general partnership | Partners | Tort liability: | the usual rule is that| Partnership does not | | |is a business entity in | |Partnership is liable |the death or withdrawal|pay federal income | | |which two or more | |for tortuous act of a |of one of the members |taxes, partnership | | |co-owners engage in | |partner, employee, or |dissolves the |files information | | |business. The partners | |agent committed while |partnership, although |return, income losses | | |own the business assets | |the person is acting |an appropriate |reported on individual | | |together. Unless a | |within the ordinary |agreement in the |partners’ personal | | |partnership agreement | ...
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...A Business Forms of Organization SOLE PROPRIETORSHIP: A sole proprietorship business is owned by a single individual and is not legally differentiated from the owner. It is the simplest form of business as there is less paperwork and it is subject to fewer regulations and restrictions. It is not usually required to register as a business unless it operates under a fictitious name or provides supplies or services that require licensing. The owner has complete autonomy for all business decisions and is the sole recipient of the business’s earnings. Likewise, the sole owner is completely responsible for all the business’s liabilities. Funding for working capital is based on and limited to the owner’s personal credit. • Liability: The owner has unlimited and unshared liability for all business debts. If the business falters, all business assets as well as all personal and family assets are at risk of garnishment except for the owner’s life insurance. • Income taxes: As a company, a sole proprietorship does not pay federal income tax. The sole proprietorship is a pass-through organization and all earnings are taxed as the owner’s personal income and generally filed with their personal income tax return on IRS Schedule C: Profit or Loss from Business. • Longevity or continuity of the organization: The owner can dissolve the business at will but the business cannot be passed on. If the owner dies or can no longer operate the business, the business ends...
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...A type of business where there is no legal distinction between the business and its owner. • Liability – What a business or an owner of the business can be subject to. An owner is personally liable for the debts and or actions of the business. • Income Taxes – Because there is no distinction there is no separation of taxes between person and business. The owner is solely responsible for reporting all business income or loss on his / her personal tax return. • Longevity / Continuity – When the business owner (sole-proprietor) becomes deceased the business is stopped. There is no continuity of the business as there was only one owner. • Control – The sole proprietor is the only person in control of the business. This person is fully in control and does not have to answer to anyone. • Profit Retention – Since sole-proprietors are the sole owner of the business they keep 100% of profits. This lets the owner use the money how they see fit. • Location – A sole proprietor can choose to do business anywhere. This also gives them the option to do business in multiple locations. In my state, Florida, there are no forms required to operate a sole proprietorship however, this may not apply when choosing somewhere other than Florida to operate. • Convenience / Burden – The conveniences are there are no annual reports to file and no fees that you have to pay to the state. However, depending on the type of business, as a sole proprietor, you may still need business licenses and...
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