...business forms. These types are sole proprietorship, partnership, Limited Liability Partnership (LLP), Limited Liability Company (LLC), S Corporation, franchise, and corporation. The businessperson needs to have an understanding of which business form is justified for their business startup. The beginning businessperson looks at the sole proprietorship a majority of times because of its simplicity (Anthony, 2011). A sole proprietorship is the simplest form of business organization. The owner of the business, the sole proprietor, is the business. There is no separate legal entity. Sole proprietorships are the most common form of business organization in the United States (Cheeseman, 2010). One example of a business that becomes a sole proprietorship is an independent contractor. The future business owner completes work for a business, but they are not an employee of these companies, they are considered self-employed and therefore a sole proprietor. Most person call this “moonlighting.” For example, if an electrical contractor with a full-time job also does home electrical installation after work or on the weekends and is not representing the company for which they work for during regular hours, the home side-work is moonlighting. Many hobbyists can also become sole proprietors if their hobby becomes popular and providing orders to customers. The electrical contractor or hobbyists, enjoy their independence and self-management. The sole proprietorship owner decides...
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...Business Entities Jessica Perez BUS 311 Business Law Instructor: Janet Fiorentino 12/1/2014 As the manager of Acme Fireworks, I need to gather information to help the owner determine whether or not he should continue to be a sole proprietorship or if he should switch to another business entity. I will help him do so by explaining each entity and how they relate to his business situation. I am the manager of Acme Fireworks, a fireworks retailer who sells fireworks, puts on ground display fireworks, and large aerial display fireworks. The company started in the owner’s garage two years ago and now has 15 employees that you manage. The company started as a sole proprietorship, and the owner has never changed the entity. The owner has informed me that the company has received inquiries from several large businesses wondering if the company could create several fireworks displays on a regular basis. The owner told the inquirers that the company could fill such display orders, and a price per display was agreed upon. It was discussed that most of the cost for a fireworks display is for skilled labor, insurance, and the actual service of setting off the fireworks. No other details were discussed. The owner is anticipating that new employees will need to be hired, but he is worried that if the large orders for fireworks displays do not continue, the company will not have the funds to pay the new employees. The owner is now considering changing the business entity, but he...
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...Being a desiring business owner, critical examination must be placed into the various business structures when opening your business. Each business requires the correct planning and structure in the business agreement. Without an agreement delineating the relationships between the members, managers, partners and shareholders, the court applies default provisions. There is a significant possibility that the default provisions dictating the law will not align with the needs of the organizers. The most common methods of business operations are as sole proprietorships, partnerships, limited liability companies and corporations. As such, after careful review and revision of the different business organizations, I have decided that I would establish a Limited Liability Company (LLC). A Limited Liability Company, quite simply is a company whose liability is limited. That’s the short version. The longer version is that a limited company is a type of company which when set-up allows an entrepreneur to keep their own assets and finances separate from the business itself. This means that people who have invested in the business (the shareholders) are only responsible for any company debts up-to the amount that they have invested and no more. It is therefore a good way for a business to get investment and run without risk to a personal wealth. Essentially a Limited Company is seen as an entity in its own right, which can be subject to legal action. As a separate body, a...
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...ownership: sole proprietorships, general partnerships, C corporations, and limited liability companies. 2. Why do many entrepreneurs initially set up their businesses as sole proprietorships? Why do many successful entrepreneurs eventually decide to convert their sole proprietorship to some other form of ownership such as a corporation or LLC? 3. How do limited partnerships and limited liability partnerships differ from general partnerships and from each other? 4. What advantages help explain why virtually all large companies are organized as C corporations? 5. What steps are involved in forming a C corporation? 6. Describe the relationship between a corporation’s common stockholders, its board of directors, and its chief executive officer (CEO). 7. How does a merger differ from an acquisition? What is the difference between a horizontal merger or acquisition and a vertical merger or acquisition? Give a real world example of recent merger to illustrate each type of combination. 8. Compare an S corporation with a limited liability company. Why do you think limited liability companies are currently more popular than S corporations? 9. What are the main advantages and disadvantages of a business format franchise arrangements for the franchisee? For the franchisor? 10. What is a Franchise Disclosure Document (FDD) and why is it important? EXTRA CREDIT (5 POINTS) 1. Conduct an interview with an individual in your community who is running a business as a sole proprietorship...
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...to the corporate business that are found all over the world. Each has its own unique properties, as well as some areas that are similar to all. In this paper, I will give scenarios of the following legal forms of business: sole proprietorship, limited liability partnership, Limited Liability Company, S corporation, franchise and corporate form. This paper will also discuss the justification as to why this business form is preferred. Sole Proprietorship. Suzie owns a shop that does body wraps that helps individuals have slimmer waists and thighs. People are wrapped like mummies and the elastic wraps are saturated in a mineral solution to help assist in breaking down fat. She owns a small shop in a strip mall downtown. A Sole Proprietorship is a business that is owned by one person, and is commonly known as a small business. It is preferred by individuals who want to start their own business because they can make all the decisions regarding payroll, hiring and firing of employees ("Doing Business as a Sole Proprietor,") Business owners of this type file their own taxes. The owner can also sell the business without the approval from others, since they own the business outright. Personal liability is also a factor when opening a business as a sole proprietor. If for example, a customer gets burned by the wraps that are used and the customer sues Suzie, she will have to hire her own attorney utilizing her own funds. This can become very costly and personal assets may...
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...Part A (the report) SOLE PROPRIETORSHIP: This business entity is the most common business used in the United States. This entity is owned and ran by one individual where there is no legal distinction between the owner and the business. This legal name of the business is the owner’s name; however, the business may operate under a fictitious name by filing a DBA. This person is legally accountable for all elements of the business including finances, loans and debts. One of the advantages of doing business as a Sole Proprietorship is that it’s easy to 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...
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...Chapter 28 Employee vs. Independent Contractor Employee – If the employer exercises a considerable amount over the details of the work, you have an employee status. If the work is usually done under the employer’s direction, you have an employee status. The employer supplies the tools. If the person is employed for a long period of time, you have a employee status. If the method is by time period, you have an employee status. An employee may not require as much skill as an independent contractor. * Employer exercise a considerable amount over the details of the work * Work is done under employer’s direction * Employer supplies the tools * Worker is employed for a long period of time * Method of payment is by time period * Employee may not require as much skill as an independent contractor * Independent Contractor – The worker is engaged in an occupation or business distinct from that of the employer. If the work is done by a specialist without supervision, you have an independent contractor status. If the worker is employed for a short period of time, you have an independent contractor status. If the payment is made at the completion of the job, you have an independent contractor status. An independent contractor may require more skill than an employee. * Worker is engaged in an occupation or business distinct form that of the employer * Work is done by a specialist without supervision * Worker is employed for a short period...
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...group of people organized for profitable or charitable purposes. Business entities include organizations such as corporations, partnerships, charities, trusts, and other forms of organizations. Business entities are subject to state income tax depending on the laws of the state or states where they conduct business (taxes.about.com). There are three basic types of business structures: Sole Proprietorship, Partnerships, and Corporations (University of Phoenix, Films on Demand, 2011). Depending on the type of business structure one chooses to operate under, will determine how a potential business owner will operate in the business sector. Sole Partnership According to the film on demand video, Sole Proprietorship is considered to be the most common and simplest form of business. Many small businesses operating in the United States are sole proprietorships. An individual proprietor owns and manages the business and is responsible for all business transactions associated with the business (allbusiness.com). Some advantages of being a sole proprietor is that a sole proprietor has complete control and decision-making power over the business, there are minimal legal cost to form a sole proprietorship, and there are less formal business requirements to adhere to compared to other business structures. However, the disadvantages of becoming a sole proprietor are that the sole proprietor of the business can be held...
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...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 to “pass-through entities”. This will benefit the company’s owners by not been obligated to pay any income tax as a corporation, do to self employment. Another great benefit that attracted us to choosing an LLC is because it limits the liability on the owners with the...
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...different major business formation types. First I will discuss the sole proprietor formation, then the general and limited partnership, the corporation formation and then the limited liability company. I will focus on the main advantages and disadvantages of the formations and decide which one would be best for a design firm. A sole proprietorship is similar to a freelancer, in a sense that one person is the boss and has responsibility over everything. They are taxed similarly as well. One advantage is that the owner would receive all profits. On the other hand they are also responsible for all losses and debts. There are two types of partnerships. You have a general partnership where each partner is responsible for everything, good or bad. Then you have a limited partnership where the limited partner is there for investment purposes only. Having a general partner would be great for splitting the workload and finishing projects at a faster rate. But if one partner is being sued the company and the other partner is at risk as well. In a limited partnership there is usually just one general partner and it could be numerous limited partners. Limited partners basically make investments in exchange for a share of the profits from the design firm. Limited partnerships allow the general partner to run the firm without any interference. A corporation is a company or a group of people authorized to act as one. Corporations are separate legally from the people they are made up of. If the...
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...Basic Accounting Concepts and Business Structures David Lickem ACC/537 April 15, 2013 Basic Accounting Concepts and Business Structures The accounting profession as a whole is extremely complex and ripe with regulations and rules. It is also enormously important to any organization, big or small, and thus can be a very intimidating career choice. As with anything else though, reaching a destination requires a starting point, and in accounting, a good starting point is to understand basic accounting concepts and business structures. These basic accounting concepts include but are not limited to the Generally Accepted Accounting Principles, the qualities of effective accounting information, and the differences between accrual based accounting and cash based accounting. The different types of business structure are also an important concept in understanding the basics of accounting. Generally Accepted Accounting Principles: Sources and Hierarchy The stock market crash of 1929, which led to the Great Depression, resulted in a demand for more government regulation in financial institutions and the stock market. The Securities and Exchange Commission (SEC) was established with the goal of developing and standardizing financial information presented to stockholders, and since then the SEC has worked alongside several private organizations to develop the Generally Accepted Accounting Principles (GAAP) Sources of GAAP The American Institute of Certified Public Accountants...
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...Corporate finance effects every decision maker in a corporation- from big to small, whether they're making high-level decisions on acquisitions or investments, or choosing vendors. Managers often have to make 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...
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...Explaining Basic Accounting Concepts and Business University of Phoenix Introduction Accounting has become an indispensible part of today’s economy. It is being used to keep a track of company’s profit or loss, assets, liabilities and owner’s equity. Financial accounting, on the other hand, is to prepare financial reports to external parties such as: investors, creditors, and governmental agencies. However, prior to reporting any information to external users, financial accounting must be completed according to Generally Accepted Accounting Principles guidelines. Identify the hierarchy of sources for generally accepted accounting principles. Generally accepted accounting principles, or GAAP for short, are the accounting rules used to prepare and standardize the reporting of financial statements, such as balance sheets, income statements and cash flow statements, for publicly traded companies and many private companies in the United States (Paul, 2008). The main sources of GAAP are the United States Securities and Exchange Commission (SEC), American Institute of Certified Public Accountants (AICPA), Financial Accounting Standard Board (FASB), Financial Accounting Standards Board (FASB), and the Governmental Accounting Standards Board (GASB). The SEC is a structure for setting accounting standards. The ACIPA created the Accounting Principle Board and serves as an organization to provide CPA services the best professional resources, guidance, and information....
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...those funds. B. Describe the organizational forms a company might have as it evolves from a start-up to a major corporation. List the advantages and disadvantages of each form. There are three main forms of business organizations and forms. Sole Proprietorships are easy and inexpensive to form. They are also subject to very few government regulations and pay no corporate income taxes. However, it is difficult for sole proprietorships to obtain large sums of capital. The personal liability is also unlimited for the business debts. The life span of the business organized as a proprietorship is limited to the life of the individual who started the business. Partnerships also similar to sole proprietorships are easy to form and have a low start up cost. The liability is also unlimited and the life of the organization is limited to the ownership of the partners. However, with partnerships it is difficult to transfer ownership and to raise large amounts of capital. Corporations have unlimited life and they can transfer ownership easier than a partnership. Corporations are subjected to limited liability but may be subject to double taxation. Setting up a corporation is more complex than setting up a partnership or proprietorship. C. How do corporations go public and continue to grow? What are agency problems? What is corporate governance? Corporations continue to grow and go public by selling their stock to the public. As the company grows they can get capital...
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...Running head: SMALL BUSINESS IDEA PAPER 1 Small Business Idea Paper Napoleon Melton, Jr. ACC/561 September 5, 2011 James Sullivan SMALL BUSINESS IDEA PAPER 2 Small Business Idea Paper Establishing a small business requires the cultivation of a business idea to a business plan that successfully outlines its unique product or service, the rationale for choosing the business organization in particular for the unique product or service, and the financial statements & implications associated with the formation of the business organization. In my small business idea paper, I will discuss my small business’s unique product or service and the rationale for my small business’s business organization formation. Small Business Unique Product or Service Spartanburg, South Carolina needs a diverse establishment in the downtown area that can cater to families, high school students, college students, young professionals, and adults as well as drive growth in the downtown area. Why? The Spartanburg area is more conducive for families and older adults than high school students, college students, and young professionals. High school students should have a place that they can hang out and have fun in. There are numerous bars for the college and the young professional crowd but are basically the same in terms of what entertainment they offer (predominately rock and acoustic acts). The downtown area has undergone renovations in the past couple of years, adding establishments...
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