There are three main types of business organizations the Cardigans can file their home decor business as, one sole proprietorship, two partnerships and three corporations. Sole proprietorship is the simplest form of business organization. Usually in sole proprietorship one person has complete control of their business;however, one assumes all liabilities. According to Miller (2013), “The sole proprietor is free to make any decision she or he wishes concerning the business—including whom to hire, when to take a vacation, and what kind of business to pursue” (Miller, 2013, p. 445). A major disadvantage of the sole proprietorship concept is that a person has unlimited liability. Since sole proprietorship consist of one person let 's use Cora …show more content…
Cora and Caley will have some disadvantageous if deciding to move into a general partnership because partnerships can have unclear authority and instability. Findlaw states, “A partnership is dissolved as soon as one of the members ' dies, retires, resigns, files for bankruptcy, or otherwise quits. This can mean a sudden and unexpected end to a profitable business” (“What Are the Disadvantages of Partnerships?,” n.d.). Cora and Caley can act with third parties on the behalf of the partnership which can hurt or help their business because either can make an unhealthy decision on the behalf of the home decor business. Findlaw states, The third parties, this means that all partners act on behalf of the partnership, can enter into contracts, and by the same token, bind the partnership into unwanted agreements” (“What Are the Disadvantages of Partnerships?,” n.d.).
A corporation is owned by shareholders and these shareholders elect the members of a board of directors to handle daily business operations. Shareholders are not held liable for the companies ' debt and legal problems which means a corporation is seen as a separate entity from its shareholders. According to Marnie Kunz (2015), “Corporations are required to pay state and national taxes, and shareholders must also pay taxes on their salaries,
• LIABILITY – Stockholders personal assets are not subject to claims of creditors. The corporation itself is responsible for its actions and liabilities. • INCOME TAXES – Shareholders in a corporation are subject to “double taxation” as in first the corporation is subject to corporate taxation, then money is paid out in dividends. Which then is taxed again as personal income tax. • LONGEVITY - The life of a corporation is limitless as
General Partnerships are not without their disadvantages. Without being an incorporated company the owners are still subject to issues such as liability, control, and location issues.
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
3 • Control – A major disadvantage of the limited partnership becomes obvious when discussing the actual management of the general partnership. Limited partners have no control of the day-to-day operations of the general partnership. Profit Retention – The limited partner receives an agreed portion of the profits that typically reflects the percentage of the amount that has been invested into the general partnership. Location – If the general partners expand or move into another state, the burden of regulatory requirements is solely on the general partners and not the limited partners. If the partners plan to move or expand into another state, they simply need to file a new DBA in that state. Convenience / Burden – A
* Taxes are paid through the corporation on a corporate tax return. It is separate from the owner’s income taxes, commonly referred to as shareholders. Shareholders also include income or losses on stocks sold or dividends earned on their yearly individual tax return.
Income Taxes: The Corporation pays both state and federal taxes on its earnings. Excess earnings may be shared with stockholders in the form of dividends, on which the stockholder then pays taxes.
a partners that might end or dissolve partnership. One of the main drawbacks of a
Also be obliged to pay taxes and dealt with civil and little acts of criminal penalties perform through agents. “The corporation is governed primarily by the statutory guidelines of the state statute that provides for its creation. The requirements for the creation and management of a corporation vary somewhat between the states, but as is usually the case, there are common threads that can be found in the corporate statutes of all states.” (Rogers,
The corporation structure has multiple owners and operators and is complex and expensive. A corporation is an independent legal entity owned by shareholders. The corporation itself is legally liable for the actions and debts of the business. The advantages of a corporation structure are limited liability, ability to generate capital, corporate tax treatment, and attractiveness to potential employees. The disadvantages are time and money, double taxing, time, and paperwork. Corporations pay income tax on their profits. In some cases, corporations are taxed twice – first, when the company makes a profit, and again when the dividends are paid to shareholders on their personal tax returns (U.S. Small Business Administration, 2013).
Generally, an S corporation does not pay corporate level tax, as C corporations do. The corporate income, whether distributed or not, is always taxed to the shareholders, and the shareholders assets and bank accounts are protected from any business
A corporation was originally designed to allow for the forming of a group to get a single project done, after which it would be disbanded. At the end of the Civil War, the 14th amendment was passed in order to protect the rights of former slaves. At this point, corporate lawyers worked to define a corporation as a “person,” granting them the right to life, liberty and property. Ever since this distinction was made, corporations have become bigger and bigger, controlling many aspects of the economy and the lives of Americans. Corporations are not good for America because they outsource jobs, they lie and deceive, and they knowingly make and sell products that can harm people and animals, all in order to raise profits.
A Corporation can be defined as a legal creation, however the corporation itself, would only exist on a piece of paper. A corporation will never die a natural death like humans die naturally, and corporations will always outlive the individual who created it. With that said, the corporation itself is never really committed to any employee or committed to any neighbor. However, a corporation can always demand employees, a corporation can always demand taxes that are extremely high, and a corporation can also restrict environmental laws. Corporations hold a great deal of power in today's society.
Corporations are a different type of business. They are more complex to start because more paperwork is involved and the corporation generally has to be registered at the state level. An ordinary corporation is formed through the articles of incorporation. These corporations are legal entities, and therefore bear legal responsibility. The shareholders of the corporation do not bear legal liability. In addition, corporate income is taxed differently it does not flow through to the owner's personal income tax statements. The
One major disadvantage of the partnership is taxation, partners will pay the tax same way as a sole trader. Therefore they will pay the corporation tax in addition to this they will have to pay income tax. Another disadvantage is liability partners are still subject to unlimited liability same with a sole trader if the business can’t pay its
Susan, Sonil and Shao have the options of two different business structures that they may consider; Partnership and Limited Company. A partnership is defined as a structure comprised of two or more partners coming together for a business venture that is looking to make a financial profit (Atrill, McLaney, & Harvey, 2015). A partnership is established through an agreement between the partners, either formal or informal (Atrill et al., 2015). Due to the fact that partnerships often fall out due to disagreements between the partners (Tasmanian Government, 2016), it is advised for any individuals seeking a partnership, to establish a formal agreement for security. A partnership has many advantages such as greater access to