...Year 10 financial statements for a partnership, Fan Company A, have been provided on the “Year 10 Financial Statements” worksheet (see the “Partnership Income and Tax” attachment below). The Year 11 financial data is also provided on the “Year 11 Financial Data” worksheet (see the “Partnership Income and Tax” attachment below). Use ‘Admit Partner D to Partnership’ template section for this data. On January 1, Year 11, Partner A died. The partnership agreement stipulated that in the event of a partner’s death, the partner’s interest would be paid to the estate within 90 days of the date of death. The balances in the partnership accounts were determined on January 1. The partnership has the authority by the partnership agreement to sell the deceased partner’s interest at a minimum of 100% of the capital account at the date of death. The remaining partners found an interested party, Partner D, who paid $350,000 for Partner A’s interest. The partnership agreement specifies that any bonus accruing from the sale of a deceased partner’s interest will be added to the remaining partners as of the date of death. Partner B will receive 5/8 of the bonus and Partner C will receive 3/8 of the bonus. Use ‘REALIGNMENT OF PARTNERSHIP ALLOCATIONS’ template section for this data. On October 1, Year 11, the partners agreed to add a new partner. Partner E will own a 20% share of the partnership. Partner E has some expertise that will benefit the partnership. Partner E is investing $50,000...
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...create. Another key advantage is the autonomy. Since the owner or individual is the business, he or she may decide for themselves whatever business decision they feel is needed to make, including the business finances. Some disadvantages would be that it is impossible to bring in others to do business being there can only be one owner. This also makes it difficult to raise capital in terms of seeking investors. Tax planning can also be challenging for the sole proprietor. Since there is no legal distinction between the owner and the business, all the income generated by the business is treated as ordinary personal income to the owner. • Liability: Sole Proprietors have unlimited liability. There is no difference between the owner and the business. Therefore, the owner is personally liable and responsible for all the business obligations and debt. Doing so makes all of the owner’s personal assets reachable to creditors. • Income taxes: All of the sole proprietor’s business income is taxed as personal income to the owner. The Unites States offers many different tax rates based on one’s income. Typically, this person ends up being taxed at a higher rate. • Longevity or continuity of the organization: When the owner dies, for the most part, the business dies as well. The executor of the business owner's estate manages...
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...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 important that the parties involved discuss a wide variety of issues up front and develop a legal partnership agreement. This agreement should document how future business decisions will be made, including how the partners will divide profits, resolve disputes, change ownership (bring in new partners or buy out current partners) and how to dissolve the partnership. Partnership agreements are...
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...sole proprietorships is the flexibility they gain by owning their own business. Since they do not have anybody to report to they can do as they please as far as hours, vacations, expansion, or direction of the business. However, there are many disadvantages that come with a sole proprietorship business. Since the individual is the business they are responsible for all financial responsibilities. They are responsible for ensuring all payments to creditors are paid on-time and in full. If the individual runs into financial issues they are responsible without protection. Also, sole proprietorships can only have one owner so you can’t bring others into the business. Likewise, they are unable to pass the business on to another individual. Tax planning can also be difficult for the individual since all income and debts for the company are also those of the individual. Overall, it is very dangerous to do business as a sole proprietorship due to the liability of the owner. 1. Costs: Almost no creation cost...
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...government. * Liability: A full understanding of all liability and where it falls is very important. All liability falls on the owner on the company. This means that not only all of the company’s assets but also the owner’s personal belongings possibly will be occupied in any scenario where the company fails. More specifically, in the event that the company flops because of unfortunate market settings, poor business policy or if there is an injury suffered implicated by company products. The liability falls on the owner of the company including all characteristics of the business and can be brought into any legal actions. * Income Taxes: As a sole proprietor the owner will need to report all incomes and damages via their personal tax report filing. * Longevity or Continuity of the Organization: Despite a sole proprietorship being rather easy to start there are other points to deliberate. A sole proprietorship structure is a common form for a small business but based on the company’s long term goals it may be smarter to go a different route....
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...LEGAL FORMS OF BUSINESS Preferred Form of Business for Different Business Scenarios Abstract Either when starting a business, or even when the venture parameters have changed, owners must decide in regard to the most suitable business structure for their needs. Whether the business will be a sole proprietorship, partnership, limited liability company (LLC) or corporation, it depends on the type of business, how many owners it has, and its financial situation. There is no one choice that suits every business situation. This paper analyses several of the most important factors to be considered when deciding in regard to the business structure, including: • Potential risks and liabilities of the business • Formalities and expenses involved in establishing and maintaining the various business structures • Owners’ income tax situation, and • Capital investment needs. Also this paper provides recommendations and examples of business structures which are suitable for different ventures. Sole Proprietorship A sole proprietorship is a one-trader business, that is, an entity owned and managed by one person. The formation and structure of a sole proprietorship business can is very informal, is not subject to extended federal or state regulation, and is relatively simple to manage and control. The main characteristic of a sole proprietorship is that the owner is inseparable from the business, which gives the owner complete control over...
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...Entity, Control, Taxation, Liability Since there are three individuals wanting to gain and contribute to this sports bar and restaurant the best suitable entity would be as a general partnership. A general partnership is recognized as being one in the same as its owners. Lou and Jose will be constituted as the general partnership, whereas Miriam would be known as partnership by estoppel. An estoppel is classified as one who is not permitted to deny the partnership. Control in a general partnership is based on the agreement by all partners. A general partnership only has one level of taxation, and is considered a tax-reporting entity and not a tax-paying entity. The profits that will be acquired from the sports bar and restaurant, each partner will be granted their share. Since each individual gets their amount as agreed upon, it goes into an individual account meaning that each need to report their earnings on tax forms individually. The liability that exists in a general partnership include unlimited personal liability. Each partner in a general partnership is liable for maintaining the partnership’s obligations. In the event of a law suit, joint partnership is sued as a group, and several liability individual partners are sued. There are three main rules that apply to a general partnership; each partner is liable for their own actions, actions...
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...Business Organization If I somehow managed to begin my own business, I would run with a sole proprietor business structure. i might want to be in all out control and recognize what is happening at all times. In this sort of structure I will have the capacity to alter my mix-ups and learn. This business structure is cost affordable to me and the way that I am an author I’ve had a sole business with composing music. I 100%$ make and compose my own particular music, therefore I might want to procure 200% of all benefits. I will either get to be successful of go into disrepair, however whenever I attempt I will be better and much more successful. I will be presenting the 4 different type of business structures, which include, sole proprietor, partnership, LLC, and corporation. I will explain each in detail, including the advantages and disadvantages. After reading this I hope to have given you knowledge on the different type of business structures of today’s time. To Begin, WHAT IS A SOLE PROPRIETORSHIP? A sole proprietorship is essentially an unincorporated business that is ran and operated by one person. The owner will reap 100% of all the benefits, but also have to cover the cost or handle responsibilities if business' obligations, misfortunes and liabilities occur. To start your own sole proprietorship business a person don’t need some type of approval before one can claim their business. If you are the only creator of something, then it legally becomes your business. Something...
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...obligations are not met, the responsibility is solely on the owner. Another disadvantage is not having the freedom to bring in anyone as a partner. The business relies on the owner, so if capital is not readily available, it may not be easy to come by. Overall, sole proprietorships are the most common and easiest businesses to start up. General Partnership A general partnership is much like a sole proprietorship except for one major area. This business form is allowed to have partners, which is an advantage. General partnerships also have flexibility in work schedules and share the profits amongst each partner. Another advantage is the partners can collaborate to make key decisions regarding the future/demise of their business. A major disadvantage is these partners are fully responsible for the business and are legally liable, even for the misactions of a fellow partner. Limited Partnership "The partner's liability is limited to the amount of his or her investment in the venture. A limited partner has no voice in management, no involvement in the day-to-day running of the business." (Stevick 2006). A limited partnership is not only beneficial for the limited partner, but for the general partner as well. The limited partner gets to invest however little or much he/she wants and reap the benefits of a business. The...
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...person. They are also the most common. They are inexpensive and easy to operate. They are great for small businesses that do not require large capital needs. All profits and losses are figured into the owners personal taxes. These advantages however do not outweigh the disadvantages. The business owner is responsible for all business debts. Sole proprietors are also personally liable if they cannot pay suppliers or somebody gets hurt in the business. If something were to happen the sole proprietor could lose everything they have to pay the debt. These are easy startups in almost any state with just a business license. When the owner retires or decides to do something else the business is finished. General Partnerships These are unincorporated partnerships where two or more co-owners carry on business for profit. Each co-owner is considered a partner. This organization is risky especially if the group of owners is large and they do not know each other. Each partner is personally liable for the debt of the enterprise whether caused by themselves or the other partner or partners. They are also liable for any injury a partner or employee may sustain while on business. They are also liable for any contracts signed for on behalf of the business. Like a sole proprietorship they are easy to form and not...
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...the owner can subject to being taken to cover any unpaid bills accrued. * INCOME TAXES- The tax rates and fees of a sole proprietorship are much lower. As a sole proprietorship personal incomes and business income taxes are filed as one. * LONGEVITY/CONTINUITY- If the profits of the business are high and well ensured the length and success can be high. Although the length of the business merely depends the owner. * CONTROL-The owner is the only one the holds the power and control. All decision makes comes from only the owner of the proprietorship. * PROFIT RETENTION- All income produced by sole proprietorship has to be reported to the IRS as income whether it is used for the business or for personal use. Either way the profits can be spent any way the owner wishes. Profits don’t have to be shared. * LOCATION- In the state of Washington the costs of a sole proprietorship are low. There are no legal required documents to file to begin business. Although form-filling must be done in order to operate the sole proprietorship. This means receiving the necessary permit from the specific local government. * CONVENIENCE/BURDEN- It is very easy to set up a sole proprietorship, but may not be easy to get startup funds from bank loans. The burden is only on the owner. This may become overwhelming and challenging because funds may become limited. GENERAL PARTNERSHIP: This type of...
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...organizational structures. These structures include sole proprietorship, general partnership, limited partnership, C-Corporations, and S-Corporations. These structures each have advantages and disadvantages, depending on the particular situation or desired effects the business owners may have. It is imperative that owners understand the differences so they can choose the best organizational structure that fits their business needs. * Sole Proprietorship * One of the most common, easiest, and cost-effective organizational structures is a sole proprietorship. This form consists of one owner, and does not have any distinction between the business and the owner. Although sole proprietorships may seem less complex, it has disadvantages as well. * Sole proprietorships have several advantages and disadvantages as listed: * Liability – Sole proprietorship does not differentiate between the business and the owner. Sole proprietorships are liable for all losses. If the company were to get sued, the owner’s personal assets would also be at risk. The owner must file as a business if they are using a fictitious name; even if a company files a doing business as, also known as DBA, there is no legal separation of assets * Income Taxes – The owner pays taxes on the profits made with their personal income taxes by filing a Schedule C (Profit or Loss from Business) which is included with the owner’s tax form 1040. * Longevity/Continuity - Because a sole proprietor has one...
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...There are a lot of legal forms for businesses. In this paper, I will talk about these forms; sole proprietorship, partnership, limited liability partnership, limited liability company, S corporation, franchise, and corporate form. I will try to develop scenarios in which each of these forms of business would be the preferred form. For each scenario, I will justify why the corresponding business form is preferred. Sole proprietorship is the first form of businesses and it is the simplest form of business organization. The Sole proprietorship and the owner of the businesses are representing the organization. Forming the sole proprietorship is very easy and does not cost a lot and this is why it is the most common business in United State. The businesses owner is the manager and he takes all the decisions and the responsibilities including the hiring, and firing the employees. The sole business owner owns all of the business and has the right to obtain all of the business’s profits. For the past points, the sole business would best a good form. Lastly, the only disadvantage is that the sole business owner is responsible for the entire business obligation. There are many examples for the Sole proprietorship such as Independent Contractor, E-Business, Brick and Mortar Business… Etc. Tina is young lady who she part time student at community college. She decided to earn some money by creating a small business for dogs’ setter. She provides services in her new business (feed the dogs...
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...Beirut and Mount Lebanon 00 CONTENT 01 LETTER FROM THE CHAIRMAN 02 JOINT LIABILITY COMPANY 03 LIMITED PARTNERSHIP 04 UNDECLARED PARTNERSHIP 05 JOINT STOCK COMPANY LIMITED LIABILITY COMPANY (LLC) 07 PARTNERSHIP LIMITED BY SHARES 08 HOLDING COMPANIES 09 OFFSHORE COMPANIES 10 THIRD-FOREIGN COMPANIES Chamber of Commerce Industry and Agriculture of Beirut and Mount Lebanon 01 2 LETTER FROM THE CHAIRMAN True to its mission of supporting the private economy, the Chamber hereby undertakes to assist prospective foreign investors all through the establishment process. The defining advantages of Lebanon’s investment environment derive from its free enterprise system distinguished by a high degree of openness to foreign trade and the absence of restrictions on capital movement. Such system naturally safeguards private ownership of all form of assets, and subjects local and foreign investors to the same code of laws and regulations. Hence, foreign investors retain full control over their business and private assets, unhindered by the constraint of an imposed local partner or restrictions on business and investment decisions. Evolution at the policy-making level continues to build on the competitiveness of the investment environment. The public-private partnership approach certainly generates abundant opportunities in building and operating infrastructure projects. Unscathed by the global...
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...Task 310.12 Sole Proprietorship A sole proprietorship is an unincorporated business with a single owner that deals with personal income tax from profits of the business. A key disadvantage of a sole proprietorship as an organizational form is that it does not create another legal entity, making the sole proprietor responsible for all debts incurred. A key advantage to becoming a sole proprietor is startup is usually easy and all the profits that are incurred by a single owner (“Sole Proprietorship Definition | Investopedia”, n.d.). Liability A sole proprietorship has possible huge pitfalls by operating with almost no protection to the proprietor’s personal liability. In other business forms like corporations and limited liability corporations a legal entity is created to protect the personal assets of owner. In the case of defaulting, creditors are able to collect debt at a business asset level and a personal asset level creating a huge risk for a sole proprietor (Larson, 2004). Income Taxes A sole proprietorship taxes are treated as one income of the sole proprietor. This means that all income, business bank accounts, and personal account must be claimed in an income tax return of the sole proprietor. This is a huge disadvantage since you are unable to defer any income to the next year (Larson, 2004). Longevity or Continuity A sole proprietorship life span is short and will always have an expiration date at some point. The organization will come to an end once...
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