...different types of business structures and then decide accordingly. There are vast differences between the sole proprietorship, partnership, limited liability company (LLC), and corporation and understanding each is vital. A sole proprietorship is a business entity that is solely dependent upon only one owner. Once a business plan is made and the proper licenses have been obtained from the state that the business will be in the business entity has been formed. There are no other formalities or no other expense attached to the formation of this business entity (Rogers, 2012). Although this seems straight forward there are major downsides to a sole proprietorship. Two such downsides are those of taxation and liability. As a sole proprietor, you the owner and the business are considered one and will not be taxed separately; the sole proprietor would be responsible for the payment of all taxes, to include self-employment (U.S. Small Business Administration, 2015). Due to this small fact the sole proprietor would be encouraged to keep immaculate records or hire an accountant to oversee all of the transactions for the business and personal means. The liability to the sole proprietor is limitless. Since there is no separation between the business and the owner it also means that there is no separation between the debts and obligations of the business from the sole proprietor (U.S. Small Business Administration,...
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...Business Idea Paper When having the excitement of starting a business, there are several factors and steps to go through before getting the plan started. In the fallowing paper bravely describe our business plan for our new company. We will mention some of the factors that go alone with the process of starting a business. Therefore, summarizing in a substantial way the different types of business structures that are suitable for small and medium sized business, along with describe the legal, tax, accounting, and other implications when of each form of business structure. Business Plan According to Abrams, R. (2003), “ The business plan process entails five fundamental steps: (1) Laying out your basic business concept, (2) Gathering data on the feasibility and specifics of your concept, (3) Focusing and refining the concept based on the data you compile, (4) Outlining the specifics of your business, and (5) Putting your plan in compelling form”. New Business Project Business Name: Universal ATM Service Product or Service: Retailed of Automated Teller Machines, Automated Teller Machines Products, Transactions Processing, Automated Teller Machines Placement, and Automated Teller Machines Services and Repairs. Business Structure: Limited Liability Company (LLC) Rationale for choosing this form of business organization: the founders of Universal ATM Service have opt to file as an LLC for their new business structure. Management has chosen this entity because it allows the benefit...
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...Part A (The Report) Sole Proprietorship A sole proprietorship is the most common form of forming a business in the United States. The individual that forms the sole proprietorship and the business is one in the same. For example, if the business owes creditors money, the individual who created the sole proprietorship business has to pay the bill. When entering into contracts the individual is actually agreeing to the contract since the person and business is one in the same. The biggest advantage of doing business under a sole proprietorship is that it is extremely easy to form since the individual creating the sole proprietorship is the business. They are fully responsible for all aspects of the business including making good on payments, collecting monies from customers, and providing the goods or services to their clients. Another reason individuals create 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...
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...Forms of Business Ownership There are basically four ways to organize a business. • Sole Proprietorship • Partnership • Corporation 1.Sole Proprietorship A sole proprietorship, also known as the sole trader or simply a proprietorship, is a type of business entity that is owned and run by one individual and in which there is no legal distinction between the owner and the business. The sole proprietor form of business ownership is the most common form in the United States and also the simplest. In this form of business ownership, an individual proprietor owns the business, manages the business, and is responsible for all of the business' transactions and financial liabilities. This means that any debts incurred must be paid by the owner. Advantages of Sole Proprietorship Quicker Tax Preparation: As a sole proprietor, filing your taxes is generally easier than a corporation. Simply file an individual income tax return (IRS Form 1040), including your business losses and profits. Your individual and business income are considered the same and self-employed tax implications will apply. Lower Start-up Costs: Limited capital is a reality for many start-ups and small businesses. The costs of setting up and operating a corporation involves higher set-up fees and special forms. It's also not uncommon for a lawyer to be involved in forming a corporation. Ease of Money Handling: Handling money for the business is easier than other legal business structures. No payroll set-up is required...
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...with each entity. The business structures that will be discussed with Mr. Owner will include sole proprietorship, partnerships which include general partnerships and limited liability partnerships and corporations which include subchapter or S corporations and limited liability corporations. Sole Proprietorship A sole proprietorship is the simplest structure and the most inexpensive business to start. The owner has complete control over the business and has the sole rights to the business profits. The owner is responsible for making all business decisions and does not have to defer to partners for decision approvals (Parrino, Kidwell, & Bates, 2012). The life entity of a sole proprietorship is limited (Parrino et al, 2012, p. 572). An advantage of a sole proprietorship is that the profits earned are subjected to lower income taxes (Parrino et al, 2012 p. 572). One of the major disadvantages of a sole proprietorship is that the owner is liable for all business debts. The issue with unlimited liability is that creditors review both the business assets and personal assets of the owner as resources for payment of debt (Parrino et al, 2012, p 6). Another disadvantage is that the amount of capital is limited to the owner’s personal funds and to any loans the owner may borrow from the bank (Parrino et al, 2012, p 6). An important factor to consider is that a sole proprietorship is easily is transferred to a new owner...
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... working capital management B. cash management C. cost analysis D. capital budgeting E. capital structure 3. Which one of the following is defined as a firm's short-term assets and its short-term liabilities? A. working capital B. debt C. investment capital D. net capital E. capital structure 4. A business owned by a solitary individual who has unlimited liability for its debt is called a: A. corporation. B. sole proprietorship. C. general partnership. D. limited partnership. E. limited liability company. 5. A business formed by two or more individuals who each have unlimited liability for all of the firm's business debts is called a: A. corporation. B. sole proprietorship. C. general partnership. D. limited partnership. E. limited liability company. 6. A business partner whose potential financial loss in the partnership will not exceed his or her investment in that partnership is called a: A. generally partner. B. sole proprietor. C. limited partner. D. corporate shareholder. E. zero partner. 7. A business created as a distinct legal entity and treated as a legal "person" is called a: A. corporation. B. sole proprietorship. C. general partnership. D. limited partnership. E. unlimited liability company. 8. Which one of the following terms is defined as a conflict of interest between the corporate shareholders and the corporate managers? A. articles of incorporation B....
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...with each entity. The business structures that will be discussed with Mr. Owner will include sole proprietorship, partnerships which include general partnerships and limited liability partnerships and corporations which include subchapter or S corporations and limited liability corporations. Sole Proprietorship A sole proprietorship is the simplest structure and the most inexpensive business to start. The owner has complete control over the business and has the sole rights to the business profits. The owner is responsible for making all business decisions and does not have to defer to partners for decision approvals (Parrino, Kidwell, & Bates, 2012). The life entity of a sole proprietorship is limited (Parrino et al, 2012, p. 572). An advantage of a sole proprietorship is that the profits earned are subjected to lower income taxes (Parrino et al, 2012 p. 572). One of the major disadvantages of a sole proprietorship is that the owner is liable for all business debts. The issue with unlimited liability is that creditors review both the business assets and personal assets of the owner as resources for payment of debt (Parrino et al, 2012, p 6). Another disadvantage is that the amount of capital is limited to the owner’s personal funds and to any loans the owner may borrow from the bank (Parrino et al, 2012, p 6). An important factor to consider is that a sole proprietorship is easily is transferred to a new owner...
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...The most basic of all business legal structures is the sole proprietorship. For new start-ups the choice of becoming a sole proprietorship is the simplest of all business forms but is it the best? I would talk about the pros and cons of a doing business as sole proprietorship. A sole proprietorship is a business of one without corporation or limited liability status. The individual represents the company legally and fully. Common proprietorship structures include part-time businesses, direct sellers, new start-ups, contractors, and consultants. All debts of the business are debts of the owner. The person who sets up the company has sole responsibility for the company's debts. There are more than 25 million business firms in the U.S. today. Of these, more than 19 million are small businesses owned by one person. This form of business has several advantages. Advantages of Sole Proprietorship are a Quicker Tax Preparation, as a sole proprietor, filing your taxes is generally easier than a corporation. Simply file an individual income tax return including your business losses and profits. Your individual and business incomes are considered the same and self-employed tax implications will apply. Lower Start-up Costs, Limited capital is a reality for many startups and small businesses. The costs of setting up and operating a corporation involve higher set-up fees and special forms. It's also not uncommon for a lawyer to be involved in forming a corporation...
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...covered will include sole proprietorship, general partnership, limited partnership, C-corporation, S-corporation, and Limited Liability Company. Also included will be a brief recommendation of the most appropriate form of ownership for the given manufacturing business. | Section A- For each of the various forms of business ownership, a brief description outlining the basic impact on the following criteria will be given; * Liability * Income Taxes * Longevity or continuity of the organization * Control * Profit Retention * Location * Convenience or burden Sole Proprietorship Perhaps the most common form of business ownership, sole proprietorship, is generally the simplest form of business ownership due to the lack of separation between the entity and the individual. While there are positive and negative implications to any form of business ownership, these are generally more exaggerated in the instance of sole proprietorship. The ease of formation and ownership and limited regulation are strong benefits, however, the negative aspects are far greater than in any other form of ownership. The first negative ramification is the lack of ability to continue the company after the owner either becomes unable or chooses not to continue the business. This may seem like a minor inconvenience, however, it should be considered if the owner would like to eventually leave a legacy to their heirs. The personal liability of a sole proprietorship is perhaps the largest...
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...can prove to be disastrous. Below is a list of business forms that are in use today. Sole Proprietorship: Liability – A sole proprietor has unlimited liability. If insurance or business assets are not enough to cover company debts, the owner’s personal assets are accessible. Income Taxes – Legally, the sole proprietor and business and are viewed as one and taxed as such. This is pass-through taxation and it can be beneficial because generally personal tax rates are lower than corporation rates. Longevity/Continuity – There is no continuity with sole proprietorship. If the owner dies, the business ceases to exist. Control – One of the best reasons to have a sole proprietorship is autonomy. The owner has complete control of the business. Profit Retention – Pass-through taxation provides better profit retention for sole proprietors. Unlike a c-corporation, sole proprietorship is taxed at the business owners personal income tax rate which is generally lower than a corporation tax rate. Convenience/Burden – Setting up a sole proprietorship is the easiest of all business forms. General Partnership: Liability – All partners in a general partnership are equally liable for the debts or lawsuits claimed against the business. There is unlimited liability and one partner is responsible for the actions of all other partners. Income Taxes – As with a sole proprietorship, the partners are subject to pass-through taxation. The partnership does not pay taxes itself. Longevity/Continuity...
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...difficult decision for entrepreneurs because of the requirements that must be met for each legal form of business. Following is a discussion about the different forms of business. A scenario simulation for each form of business including justification for the preferred business form is also present. Sole Proprietorship According to Cheeseman (2010, p. 529) “an entrepreneur is a person who forms and operates a business.” An entrepreneur starting a business independently is a form of sole proprietorship. The owner of the business is the sole proprietor. A recent college graduate who opens a mobile dog grooming service is an excellent example of a sole proprietorship. The graduate who has experience with animals from walking dogs in the neighborhood to gain extra income would be ideal for this type of business form. He or she has rapport with the residents from prior interactions and has established familiarity with the animals. Sole proprietorship is the preferred business form because college graduates will not possess the income to hire employees and can handle the workload alone. The costs associated with a sole proprietorship are low and the owner receives the...
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...Part A The Report Sole Proprietorship This is the most common form of business. The business and the owner are the same. That means all debts and liabilities are the responsibility of the owner. The advantage of this form of business is that it is so easy to start. Basically, you just start selling stuff or providing a service. Of course, if permits or special licenses are needed, you still have to get those. The disadvantage is that you can't bring in a partner because there can only be one owner. Liability: The owner is personally liable for all losses, debts, and liabilities. Income taxes: There is no difference between the business owner and the business, all income earned by the business is the same as personal income to the owner. Longevity or continuity of the organization: Duration of the business is dependent on the owner. If the owner becomes dies or becomes incapacitated, the business will normally cease to exist. Control: The owner has complete control over all decisions regarding the business. Profit retention: All profits and losses pass through to the owner and are taxed only once at the individual tax rate which enable them to keep more of the profits. Location: A sole proprietorship is easily expanded or moved to another state. A DBA needs to be registered in each state, along with filing taxes in each state if required. Convenience or burden: No permission from anyone is needed to form a sole proprietorship. There are no extra tax...
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... and financial implications. The best-suited business calls for a thorough analysis of pertinent facts before making a decision – requiring some careful planning and strategy. This study provides an analysis of seven forms of legal business. Sole Proprietorship Sole proprietorships are fairly simple and inexpensive to create and operate. Legally, a sole proprietorship is inseparable from its owner, and therefore the owner is personally liable for business debts (Cheeseman, 2010). The tax implications for a sole proprietorship are simple. The business owner reports profits and losses on their personal tax returns. Sole Proprietorship is the preferred form of business in establishing or operating a small business where personal liability is not a big concern. Sole proprietors own businesses in many industries. Some of the more common sole proprietorships are landscaping services, housecleaning services, independent writing services, and tutoring services. * Landscapers tend to work alone or hire a small team of employees, providing landscaping services to homeowners and businesses. Sole proprietor may take on independent contracts and projects. * Housecleaning services have a relatively low start-up cost. Sole proprietors can offer a variety of housecleaning services, including general housekeeping services, laundry, carpet cleaning, and window washing. * Independent writers often work as independent contractors, providing general writing and website...
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...Sole Proprietorship: Sole proprietorships are businesses that are owned and operated by one person. The business and the owner are one and the same, as there is no legal separation between the two. The owner would only have to register as a business if he were to operate under a fictitious name or if they provided services requiring a license. * Liability: As there is no legal separation between the owner and the business, 100% of the liability is on the owner. He or She would be responsible for all debts, accidents, losses, etc. * Income Taxes: Aside from having to file a Schedule C, the owner would file income taxes normally. Because the owner and the business are one, all profits or losses are reported through their personal income tax forms. * Longevity or Continuity of the Organization: The continuity of a sole proprietorship hinges on the wellbeing of the owner. The company and the owner are one, so neither can exist without the other. In very rare circumstances, proper legal documents can keep the company alive in the event of the owner’s death. However, it is unlikely to continue in most cases. * Control: Sole proprietorships are convenient because they provide the owner with full control. The owner can make any decision necessary without having to get any approvals or permissions. * Profit Retention: Profits are normally kept by the owner and can be put back into the business for growth or kept for personal gain. * Location: While the sole proprietor...
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...“Different organizations provide different advantages and disadvantages in creation cost and simplicity, ongoing maintenance requirements, dissolution and continuity, fundraising, managerial control, public ownership, tax planning, and limited liability.” The nature of the business being conducted has little to do with the way the business is organized. (Johnson, 2013) Sole Proprietorship: The basic concept of sole proprietorship is that there is no distinction between the individual business owner and the business. To start this type of business, in most cases, one only needs to begin charging money for goods or services. Because of its simplicity, sole proprietorship is the most common business structure in the United States. According to the U.S. Small Business Administration, “over 70 percent of businesses are owned and operated by sole proprietors.” (Beesley, 2013) Following are some of the characteristics that lend both advantages and disadvantages to this type of business organization. * Liability. As sole owner of a business, there is no severability of liability between the business and the individual. Therefore, all gains and losses of the business are also the gains and losses of the individual. The aspect of unlimited liability is one of the biggest disadvantages of this type of organization. Because there is no legal distinction between the business and the individual, if the business does not have the ability to fulfill its contractual financial obligations...
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