| | | Student Answer: | | It is generally more expensive to form a proprietorship than a corporation because, with a proprietorship, extensive legal documents are required. | | | | Corporations face fewer regulations than sole proprietorships. | | | | One disadvantage of operating a business as a sole proprietorship is that the firm is subject to double taxation, at both the firm level and the owner level. | | | | One advantage of forming a corporation is that equity investors are usually exposed to less liability than in a regular partnership. | | | | If a regular partnership goes bankrupt, each partner is exposed to liabilities only up to the amount of his or her investment in the business.
An example of this could be Virgin; a world-wide well known travel and tourism business which sells holidays and flights to customers. There are different types of private companies. The difference between them is in the amount of liability the owners have if the company goes bankrupt. Private limited companies issue shares that can be bought and sold only with the permission of the board of directors. If the
• Income Taxes – being a sole proprietor gives the individual the option to file taxes under a separate employer identification number. The other option is to file their return normally and just fill out an IRS Schedule C to show profit or loss for the business (Smith, 2011). • Longevity/Continuity – One of the main issues of longevity in regards to sole proprietorship is that it dissolves when the owner dies so it makes it not possible to have continuity (Joseph, 2011). • Control – one of the great advantages of sole proprietorship that a person doesn’t have with a partnership or corporation is that you don’t have to answer to anyone but yourself in our decisions. You have
Most people choose a credit union because they make you a top priority, low or no minimum balance requirements, secure funds, and bonus checks. They don’t choose banks mostly because banks are for profit, generally shareholder owned companies delivering a wide array of financial services to the public at large. Banks are regulated by either the federal
Shareholders who have over 50% of shares can take over the business. This means the past owner lose power over the business. Financial information can be obtained by rivals meaning they are able to tell if the business is doing well or not. They are lot of legal formalities required to become a shareholder. The profit is shared along lots of shareholders.
· Liability-A C Corporation has limited liability in that it is seen as a separate entity from the owners, which in turn protects their personal assets from being taken to pay for the company’s debt or liability losses. As with the other business entities, insurance can be purchased to shield the assets from being taken due to a liability loss. · Income taxes-Corporations are taxed twice. They are first taxed on the profits made by the corporation itself then the profits to the shareholders, also known as dividends, are taxed. · Longevity-The dissolution of a C-Corporation can occur because of a shareholder becoming disabled or dying, the failing profits of the company or because they can not agree on the direction or handling of the company.
As a C-corporation the business, not the owner, would be held liable for any financial damages. Any accidents involving employees or customers would be the responsibility of the corporation to settle. Financially speaking incorporating is the best option because as a sole proprietorship the owner is currently paying a much higher tax rate versus the corporate tax rate. With the tax code being different for corporations there is better profit retention and security. The client also mentioned the issue of partnership and the selling of stock in order to expand the company.
1. Outright purchase of Smith stock a) Yes, Mr. Jones should purchase the stock of Smith outright, leaving Smithon intact as purchasing the stock of Smith co. is the simple and reasonable transaction where he can also minimize the cost of administrative matters. While issuing debt in his Johnson Services Co. to pay for the Smith Company there can arise debt issue for Johnson co if the cash flow of the company is insufficient in making such purchase to buy Smith co stock. b) Converting C corp to S corp has taxation benefit as C corp faces double taxation. Here, converting Smithon to S corp can give an advantage of having a control of limited or small number of shareholders.
Each business organization has different tax, legal, and accounting implications, along with different financial responsibilities to the owners. A sole proprietorship is the simplest form of a business. One person owns and manages this type of business. This individual is responsible for all aspects of the business. With a sole proprietorship, the owner pays taxes on the income from the business as part of his or her personal income tax.
Also included in the sum are the net exports; the total exports minus the imports. There are many purchases done between companies during development of a final product, the cost of these purchases do not count toward the GDP because the cost of those purchases are considered in the final cost of the finished product. There are two basic versions of the GDP,