...niche they should then figure out what type of business structure best suits their service or product. Three types of corporate business structures will be explained which include General Corporations, Subchapter S Corporations, and a Limited Liability Company followed by a discussion of the advantages and disadvantages of each type. General Corporations are one of the most common structures primarily used by business owners. The company is an individual legal entity which is owned by an unlimited amount of stockholders. This structure is advantageous for shareholders because they have protection from the companies’ creditors. Because of the separate legal nature of the General Corporation, stockholders personal assets are protected from business debt or liability (Harvard Business, 2016). On the downside, General Corporations are more difficult to establish not only because they are more expensive but they will also require a lawyer because there are more state and federal regulations and rules. A Subchapter S Corporation is a highly desirable entity because it has a special tax designation that the IRS grants to corporations that have already been established (Entrepreneur, 2016). Benefits of an S Corporation include increased tax savings as well as business expense tax credits. S Corporations allows firms to have an independent life separate from the...
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...that raise debt to equity issues? Treasury Regulation Subchapter A, Sec. 1.368-2T states that all of the assets (other than those distributed in the transaction) and liabilities (except to the extent satisfied or discharged in the transaction) of each member of one or more combining units (each a transferor unit) become the assets and liabilities of one or more members of one other combining unit (the transferee unit). With the purchase of Smithon, you will be responsible for any current and future tax liabilities of that corporation along with the responsibility of day to day operations. Since you are purchasing the company and inheriting all tax liability it is not in your best interest to purchase the stock and leave Smithon intact and would just be more costly as you are responsible for the tax liability either way due to the purchase. The issuing of debt in the Johnson Services company would definitely raise debt to equity issues. Johnson Services Company is already having difficulty and has incurred significant losses and the issuance of more debt would only place more of a hardship on the company. Also, if a company has to high of a debt to equity ratio it will look unattractive to investor and may make it harder to obtain financing from a bank. b. Should Mr. Jones convert Smithon to an S corporation and change the fiscal year-end to a calendar year-end? IRC § 1378 states that a taxable year for S corporations shall be a permitted year or taxable year which is...
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...of Directors; When contemplating whether to elect to become a “Subchapter S” or not, you must consider the benefits as well as the potential problems that might arise according to the Internal Revenue Code. The Code allows certain corporations to elect not to be taxed. This is an important exception to the fundamental rule that income of a C corporation is taxed twice, first the income is taxed to the corporation when earned and then to the stockholders when paid out to them as dividends. Subchapter S, S corporation, or limited liability in corporations (among other terms), are treated as conduits for tax purposes. The tax liability is passed through to their shareholders. Although S corporations are not subject to income taxes § 6037 requires the electing corporation to file an annual information return because the corporation is still a “taxpayer” by virtue of §7701(a)(14). Where the magnitude of the...
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...Gurprett Atwal Business Structure There are three types of corporations: sole proprietorship, partnership, and corporation. Each one of these holds a significant background, however, “selecting the right type of company or corporation for your new business helps maximize your chances of financial and operational success” (Business Entity Types, 2016). A Sole proprietorship is the most inexpensive way to start a business with a group of members. This is one of the easiest ways to obtain the business name and certificate. The con to having a sole proprietorship is that you are liable for what happens with the firm. A Partnership is co-ownership. Either you have a written agreement or only limit the investor to only what the investor invests into this business. However trusting your partner is the biggest task to maintain. Making sure that your partner knows its responsibility and roles. Corporations have three subdivisions which include: General, Subchapter and Limited Liability Corporations. General Corporations * Separate Legal Entity * Owned by stockholders * Unlimited number of stockholders * Shareholders are protected from business creditors (ie business debt). Want to make sure that you have an attorney for paperwork. Corporations are harder to start and have more steps. If the company plans to get bigger, the organization can have their assets protected more Subchapter S Corporation * Special IRS Tax Status * Mostly used by small business...
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...Business Law II Research Paper The advantages, from a liability standpoint, of a business incorporating and that given a business is going to incorporate…the difference in tax treatment between a C-Corp, Subchapter S and an LLC When businesses are started, one consideration that must be made is what type of business it will be. Many decide to incorporate themselves and look to the advantages they may gain from this. Liability may be one of the biggest advantages to incorporating a business. Along with advantages of incorporating, the tax treatment for different types of businesses will differ whether it is a C-Corp, Subchapter S, or an LLC (limited liability corporation). All of these options will give businesses the best solution to take advantage of different types of tax treatment and the advantages of incorporating. From a liability standpoint, incorporating a business is going to protect the owners’ personal assets from business obligations, debts, and any other business activity. With out the liability protection of incorporating, the business owner is responsible for these obligations, debts, and business activity. Once an owner makes the decision to incorporate, they separate personal assets from the business (“Incorporating a business,”). It is important for owners to incorporate to help protect themselves and their families from taking on the burden of a failing business. How does incorporating protect business owners’ personal assets?...
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...LIT1 Task 1 Part A (the report) SOLE PROPRIETORSHIP: A sole proprietorship is the simplest, quickest and cheapest form of business to start making it the most popular types for first time business owners. A business owner and a sole proprietor may operate under different names, but legally, they are the same entity. Which leads to one of the biggest disadvantages of becoming a sole proprietor; the owner is responsible for all debts and fault created by the business. One of the major advantages to starting a sole proprietorship is the simplicity behind the formation. There is very little paperwork that needs to be filed at the inception and it takes very little work to keep the business compliant with state and federal laws. Another advantage to a sole proprietorship is taxes. Any money made by a sole proprietor is considered income to the owner. The profit is claimed as income on the owner’s annual tax filings. * Liability: Because there is no legal separation between an owner and the business in a sole proprietorship, the business owner is unlimitedly liable for any debt or fault of the business. Even if the sole proprietorship dissolves, the owner will be liable for the debt. If the debt is not taken care of in a timely manner it will could affect the owner’s credit rating and lead to future earnings being garnished. * Income Taxes: Taxation of a sole proprietorship happens once, at the income level of the owner. Any profit made by the company is considered an...
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...business risks is by analyzing its different structures such as sole proprietorship, partnership, and corporation. Each business structure is progressively turning around in ideas to make a profit. Entrepreneurs skim through the diverse models searching for successful companies with a unique system. The success of a business relies in identifying an appropriate business structure. Therefore, understanding how a business structure may or may not be advantageous is very important. Corporate business structures consist of general, subchapter, and limited corporations. General corporations are a separate legal entity owned by unlimited number of stakeholders protected from business creditors. A subchapter S corporation has the characteristics of general corporations with special internal revenue service; a tax status used mostly by small businesses that provides tax advantages. Limited Liability Company is not a corporation but similar to an S corporation with added flexibility and fewer restrictions. A disadvantage of a LLC structure is the hierarchy type of organization where only few personnel establish rules and policies. Moguls comprehend the necessity of a strong business structure and thrive in their industries. On the other hand, small businesses consist of location and need rather than knowledge or expertise. Furthermore, the most difficult business structure is a corporation because it consists of many individuals or shareholders who form a hierarchy type of structure. Every...
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...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 involved with the managing of the business, are responsible for the debt and obligations of the business, not to exceed the amount of their capital contribution. Corporation. An entity that exists separate from its owners. Starting a business under this structure...
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...options available. First, one of the most common business structures are corporations. Corporations are complex and normally require professional assistance from an attorney. However, corporations allow the owners to protect personal assets from business obligations. Corporations are separate legal entities that are owned by stockholders. A corporation can have unlimited number of stockholders which makes it easier to raise capital, (Planning your business: Research, goals, and business plans (2011). Second, another available business structure is a Subchapter S Corporation (S Corporations). This structure is mostly used by small businesses. The advantages are tax savings, business expense credits, and independent life for owners. The Subchapter S Corporation allows the owners to have limited liability, but also function as a partnership or sole proprietorship. Another advantage is shareholders can easily leave the company without drastically affecting the business. The disadvantages are stricter operational processes and shareholder compensation requirements, (Planning your business: Research, goals, and business plans (2011). Third, an additional business structure is a Limited Liability Company (LLC). LLC is a popular choice at this time. Many business owners are attracted to the added flexibility along with fewer restrictions. LLCs are not corporations, but are similar to S Corporations, (Planning your business: Research, goals, and business plans (2011). ...
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...offers the entrepreneur the means to operate according to the law. This paper will define sole proprietorship, partnership, corporations, and limited liability companies, discuss the advantages and disadvantages of each, and discuss which the most important appropriate form of ownership is for an aggressive entrepreneurial firm. Define A sole proprietorship is defined as a form of business organization involving one person, and the person and the business are essentially the same. Sole proprietorships are the most predominant form of business organization. Partnership is defined as a form of business organization where two or more people pool their skills, abilities, and resources to run a business. A limited partnership is a modified form of a general partnership. The major difference between the two is that a limited partnership includes two classes of owners: general partners and limited partners. There are no limits on the number of general or limited partners permitted in a limited partnership. Similar to a general partnership, the general partners are liable for the debts and obligations of the partnership, but the limited partners are liable only up to the amount of their investment. A corporation is a separate legal entity organized under the authority of a state. Corporations are organized as either C corporations or subchapter S corporations. A limited liability company (LLC) is defined as a business organization that has grown rapidly throughout the United States...
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...request, for business structure advice, I believe the following business advice will be extremely helpful to lead you to the best decision. I would advice to develop steps to a business plan. First, write out a business plan. The business plan is to structure a successful business, which will outline and define the goals and guidelines of how to accomplish and structure those goals. A business plan also will help to assist owners with organizing thoughts, developing career ideas and how to lead a business. First and foremost, you must know which business structure and option there are; these options will include sole proprietorship, partnership and corporation. A partnership could be general limited, associated with two or more people as business partners and a corporation could be general or a subchapter S-Corporation. Each of these structures has their advantages and disadvantages and differences in tax consequences. I strongly suggest you review and choose the efficient and effectiveness that best fits your business structure or service needs. The following will include different types of business structures. A sole proprietorship is the best structure for those business owners starting out with limited funds and wanting complete control over all the business decisions. When becoming a sole proprietor, one is responsible and liable for all and any expenses and debts that the business incurs. Being a sole proprietor, one should keep sufficient records of federal...
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...Business Structure Shirley Ortez FIN 571 Kevin Suber January 8, 2016 Business Structure Introduction: Initiation into the consumer market, business owners must explore its competitive market, its contribution and determine whether it can be fruitful. Once analyzing its contribution, stablishing business structure equipped to support the company's necessities and requirements in efforts to use it as a guideline for the owner's potential business plans. In the following passage, the rewards and shortcomings of common business structures utilized in today's market. Sole Proprietorship & Partnerships: Sole-proprietorship is a business entity directed by one individual. A particular structure that benefits business owner is the low licensing fees, and the simplification of the process attract first-time business owners to implement this particular business structure. With its appealing attributes, other major factors to study are the financially liability linked to a sole proprietorship. Business's financial obligation and personal equity become one source of funds. It indicates that a sole trader is responsible for any financial obligations the business accumulates and the owner's personal finances can me liquidated to satisfy the business debt. The secondary business structure commonly used is a general partnership and limited partnership, like a sole proprietorship, general partners are equivalently responsible for a business's financial...
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...different types of business structures; sole proprietorship, partnerships, corporations, and Limited Liability Partnership (LLP) (Parrino, Kidwell & Bites, 2012). Start-ups and small business perform as either sole proprietorship or partnerships because of the small operating scale and capital requirements. However, the larger a firm grows, the greater the benefits to organize as a corporation (Parrino, Kidwell & Bites, 2012). This paper will introduce these four different types of business structures stated in the above, and explain how each business might and might not be advantageous. Therefore, this paper will help the business owners, who will start the business, to determine which type of business structures they like to start. This paper will also help the business owners to determine which next path they like to select if their business grows and expand. Sole Proprietorships A sole proprietorship is a business owned by a single person. A sole proprietorship might provide several advantages as follows: The business owner can start the business with an inexpensive way because there are minimal fees to obtain a business name and certificate. Therefore, business owner can start out with limited funds and hold absolute authority on decision-making (University of Phoenix, 2013). Furthermore, profits, which a sole proprietorship makes, are subject to lower income taxes than are those from corporation (Parrino, Kidwell & Bites, 2012). In contrast, a sole proprietor...
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...Department of Finance and Administration P. O. Box 1272 Little Rock, AR 72203 TABLE OF CONTENTS Page SALES & USE TAX .......................................................................................................... 1 INCOME TAX WITHHOLDING....................................................................................... 3 MISCELLANEOUS TAX................................................................................................... 5 INDIVIDUAL ESTIMATED TAX ..................................................................................... 6 PARTNERSHIPS AND LLC’s .......................................................................................... 8 SUBCHAPTER S CORPORATIONS ............................................................................. 10 CORPORATION INCOME TAX .................................................................................... 13 MOTOR FUEL TAX ........................................................................................................ 16 MOTOR CARRIER FUEL TAX ..................................................................................... 16 ELECTRONIC FUNDS TRANSFER ............................................................................. 17 OTHER IMPORTANT STATE CONTACTS ................................................................. 18 OTHER IMPORTANT CONTACTS .............................................................................. 19 This information was produced to give...
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...Joint Stock Company A joint stock company is defined as a corporation having its own trade name and a predetermined amount of capital divided by shares. The liability of shareholders is limited to their capital. The structure and organisation of joint stock companies are subject to regulation by the Turkish Commercial Code. However, the founders of joint stock companies are afforded significant flexibility in drafting the articles of association, thereby serving the needs of the specific venture. Capital Market Board regulations also apply to joint stock companies whose shareholders number at least 250, or who have issued bonds or whose shares are quoted on the Istanbul Stock Exchange. A minimum of five shareholders, who may be either real persons or legal entities, are required for the formation of a joint stock company. The overall share capital must be a minimum of 50 billion TL . The capital of a joint stock company is divided into shares of equal value which are treated as negotiable commercial paper. The shares may be issued in either registered or bearer form. Registered shares are freely transferable subject to approval by the board of the company, unless prohibited by the company's articles of association. Bearer shares are freely transferable under the Code of Obligations, unless otherwise agreed by the parties. Decision making in a joint stock company is by majority vote; but the Turkish Commercial Code includes certain provisions to protect minority interests...
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