Assignment 1: Partnership vs. Corporation
Due Week 7 and worth 240 points
Use the partnership and corporate tax returns for the practice sets titled, “Pet Kingdom” and “ROCK the Ages, LLC” that you prepared in Weeks 3 and 5 in order to complete this assignment.
Write a four to five (4-5) page paper in which you: 1. Compare and contrast the tax rules and treatment applicable to corporations and partnerships. Indicate the major way in which the tax treatment affects the shareholders or partners. The tax rules for a corporation are taxed at a different level than the various business structures. Corporations are the only business structure that are required to pay its own income taxes based on the profits received. The corporation
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A partnership is the creation of two or more people who operate a business as co-owners and share profits. There is a collective amount of money that is contributed to the organization as it pertains to all aspect of the business and in return each individual share equally the profits and losses of the business. Partnerships require that there be a partnership agreement established because more than one person can make decisions for the partnership. The agreement should include how future business decisions will be made, the profits will be split among the partners, and the dissolving of the partnership (sba.gov). The partnership must file an annual information return that reports income, deductions, gains, and losses that occur from normal business operations. The business does not pay income taxes but the business pass through any profits and losses to its partners. Taxes that are included in a partnership are: employment tax, excise tax, annual return of income, income tax, self-employment tax, and estimated tax. Other qualifications of a partnership is that partners must furnish a copy of their Schedule K-1 form to all the partners by the date of the Form. It is important to remember that partners are not employees and they are not to be issued a W-2 Form. 2. Explain at least two (2) reasons why a business owner might opt to become a partnership over a corporation. Provide support for your rationale. According to Eric Feigenbaum of Demand Media, gives
Q1: List the stakeholders involved and their influence. Identify any fundamentals of business or capitalism involved.
The business entities of corporations and partnerships share many similarities, however key difference exist, primarily in terms of formation, taxes and liability. This section will largely address the issue of liability, in terms of the effects of damages, disclosure requirements and personal liability for both corporations and partnerships. Additionally Amazon will be examined as a partnership rather than a corporation to further illustrate these differences.
Know which of the following statements is not true regarding the characteristics of a general partnership?
When it comes to partnerships Alex, Bill, Carl, and Devon will have two options- a general partnership or a limited partnership. Partnerships are beginning to be a business form of the past. Once upon a time, partnerships were “the default form of business and provided the benefit of pass-through taxation, but lacked the important feature of limited liability” (Chrisman, 2010, p. 465). In a general partnership, each partner associated with the entity will be held liable for their own business decisions as well as
5. (TCOs 1, 2, 8, 9, and 10) One of your best individual clients is thinking about starting up a new business, and he is seeking your advice on which business form he should select. In particular, he’s trying to decide whether to operate the business as a partnership or a C corporation. Explain to him the significant tax and nontax issues that will arise from choosing each of these entities compared to the other, including how
Gross profit ratio had been declining through the period of 2008-2010, which indicates decrease of markup that the company achieved on its inventory, which also means that it lowered sales prices compared to costs.
Liability All liabilities are the responsibility of each partner. In the event of litigation, any creditors can go after the personal assets of each partner to recover any debt owed. But since liability is spread out between the owners, one may feel less risk is being taken. 2. Income Taxes General partnership may also benefit from pass-through taxation, meaning the partners are taxed like sole proprietors. Business income is reported on the personal tax filing while business losses can be deducted to reduce personal tax liability. The partnership itself is not subject to federal income tax. However the partnership needs to file an information return utilizing the IRS Form 1065. 3. Longevity or continuity of the organization Once the partnership agreement is fulfilled, the general partnership may dissolve. A buy/sell agreement may be included in the articles of the partnership to allow the
2. [LO 1] Compare and contrast the aggregate and entity approaches for a sale of a partnership interest.
A partnership is an arrangement between two or more groups, organizations or individuals who work together to achieve common aims or who have common interests.
This issue reflects a problem with Integrity and Ethical Values factor of the internal environment. Policy is important to and the foundation of an effective ethics program. Policy addresses a variety of behavioral issues, such as integrity and ethics, conflicts of interest, illegal or otherwise improper payments, and anticompetitive arrangements. So there is no problem on this factor.
Anytime you start up a business or you take over another company there are multiple things you must do to get started. One of the major things one must do is decide on what type of ownership you want. There are many different types of business ownerships out there, but some will benefit you more than others. In this paper you will be learning about the difference two types of business ownerships you can have. The main point of the paper is to help someone that’s going to become an owner of a business be able to do what’s best for not only them, but also what will be best for the business. Sole trader ship and partnership are the two best ownership because they will benefit the owner and business more by going by what the company stands for.
A partnership is a business that has 2 or more people working in it like Starbucks is a business that is in a partnership. The advantages are you have more capita available to you and the company you have combined skills with other workers simple to set up you have tax advantages the disadvantages are unlimited liability you have to share your profit with the other owners you can have conflicts with owners or workers that do not agree partnership ends to death and possible
explaining the differences between a company and a partnership, and the benefits to them of adopting the former.
When formatted as a partnership, a business’s revenues and expenses are passed to each partner directly to avoid double taxation. A corporation, however, will have its recognized revenues and expenses taxed before profits or losses are passed to the owners, who will then have their income taxed on a personal level (Hoyle, 2014, 630). A partnership will see a decrease in each partner’s cash assets as well as the possible liquidation of non-cash assets to pay for the damages that do occur. The decrease in the partners’ capital will reflect on the financial statements.
A partnership is a business organization where the partners own the business together and are