Sole Proprietorship
Sole proprietorships are typically businesses that have one owner. There many advantages to operating a business as a sole owner. One of those advantages is that it is fairly easy to form. When operating a sole proprietorship, filing an independent tax report for your business is not mandatory. It is optional for the owner to hire employees to help run the business. The owner is in charge of making all business decisions and transactions. Sole owners have the ease of selling their business, closing it or giving it to his heirs. While opening businesses sometimes require you to obtain a business license, sole proprietorships are typically less expensive than others. Also, it is often less expensive to start a sole proprietorship.
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The S Corporation is different from the C Corporation because it has a special tax status. According to IRS.gov “It gets its name because it is defined in Subchapter S of the Internal Revenue Code.” Business owners who are wanting to operate as an S Corporation has to file for that status with the IRS and they must meet all guidelines. Other than the tax status, C corporations and S corporations are very similar in their operations.
The shareholders of both corporations are not responsible for obligations from their business on a personal level. This is referred to as limited liability protection. There are some advantages to operating as an S Corporation. An S Corporation owner has the benefit of having their personal assets being protected. This is to say that if the business does not succeed, the creditors are not allowed to go after the owner’s personal property such as their house and personal bank account. S Corporations also are not required to pay federal taxes. S Corporations are allowed to report any losses that the business may have on their personal tax filings. This can be a huge benefit to the owners during the beginning phase of the business. One of the main advantages of operating a C corporation is that there is no limit to the number of owners allowed. Therefore, if you are planning to start a business and you know that you will have many owners, then this will probably be your best business option. Most
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Each state may use different regulations, and you should check with your state if you are interested in starting a Limited Liability Company.” The owners in a Limited Liability Company are called members. There are some limitations on what type of businesses is allowed to form as an LLC. Generally speaking, banks and insurance companies are not allowed to form LLCs. Unlike corporations, LLCs are not required to have meetings on a regular basis. Also with LLCs, there is no ownership restrictions placed on them. With LLCs, they are allowed to use the cash method for accounting instead of the accrual method. This means that their income is not shown until they have actually received it. Like sole proprietorships and partnership, LLCs have the luxury of avoiding being double
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.
Longevity or Continuity: A C - Corp has unlimited life. Unlike sole proprietor or S Corps, an investor can transfer or give their shares in the company to whom ever they choose.
Corporation – “A business organization that exists as a legal entity and provides limited liability to its owners.” (Longenecker, Petty, Palich, Hoy, Pg. 205) The main advantage of a corporation is that the business liability falls onto this entity instead of the individuals that own it. The disadvantages of this organization are found mostly in its formation. A corporation is expensive to create and requires compliance with state
The limited partner only risks what they invested in the business. The downside is if the limited partner becomes active then they could potentially lose personal assets. The S corporation is a more favorable tax option on income. The disadvantage is there is certain requirement that must be met. The LLC is a great option. With this type, the risk is only what is invested unlike sole proprietorship. It is easy to set up, and has tax advantages. The downside is if a corporation wanted to switch to C, it would have to pay additional taxes. I do believe the option they picked is best for them at that time. C has tax advantages. If they started with LLC and later wanted to change, it would cost them. C is a great way to get capital as well.
A company is separate from its employees, shareholders or members in that the connection between them is usually a mere contract of employment which may be terminated leaving both parties to go their own ways. The same generally applies however to those businesses which are not companies. There is also more importantly usually a separation between the company and its owners.
A corporation, according Understanding Business, is "a state-chartered legal entity with authority to act and have liability separate from its owners, its shareholders" (Nickels 2013, 123). An advantage that is explained in Nickels' text is the "ability to raise more money for investment" (Nickels 2013, 123). This is extremely pertinent to Newell Rubbermaid because it is an organization that thrives on innovation, and there needs to be access to enough capital to bring many of the new, creative ideas, into the marketplace in mass quantities. Secondly, the "ease of ownership change" is extremely important to Newell Rubbermaid due to the financial crisis in 2009, when the ownership of Newell Rubbermaid had changed hands between a variety of institutional investors, showing just how easily the ownership of a large corporation can be transferred (Nickels 2013,
LLCs must typically pay more fees to file as LLCs compared to some other business entities or sole proprietorships. Additionally, many states require yearly renewal fees. However, these fees are usually less than what some other corporations have to pay. Because of the protections afforded to LLCs, some types of businesses are ineligible to file as LLCs. Banks, insurance companies, and medical service companies are examples of businesses that can not be a LLC. Another big disadvantage is taxes. Although LLC’s allow owners to avoid federal taxes, you may actually end up paying more than it would with a different corporation, depending upon the nature of the business. Working with an accountant and/or tax lawyer is a really good idea when planning your business and forming your LLC but can also be quite expensive. The LLC business form is a relatively new concept. As a result, not a lot of cases have been decided surrounding LLCs. Case law is important because of predictability. If you know a court has ruled a certain way, you can act in a specific way to protect yourself. But if not many laws have been established yet, there is a certain vulnerability with your corporations that could expose you to greater
Taking on the risk to open you own business is not a smooth, easy process; although, perseverance can take you a long way. Troy Smith made several attempts at opening restaurants independently as a sole proprietor, but it was until a small root beer stand came into his possession did he find the success he was looking form. This stand called Top Hat was about to become a parking lot when Smith realized it’s value and put his focus into making it successful, while watching this success grow Charles Pappe became interested and Pappe and Smith formed a limited partnership; whereas Smith was the general partener that made the business decisions and Pappe was the limited partner that invested money ad concentrated on sales. This differs from a
A corporation is a separate legal entity which is incorporated through the legislative process of going through a registration process. A corporation either operates as a non-profit or profit organization. The corporation has to follow the lawful rights and obligations that are different from the employees and shareholders. Corporations have some good and bad with its formation. The creation of a shield that will protect individuals from legal responsibility and personal liabil...
Companies have to pay corporation taxes on their taxable profits. This is why the corporation taxes depend on how much profit a business makes.
One awesome advantage that comes with an LLC, other than the protection from legal liabilities like stated above, is the ease of getting it. They also take much less paperwork and effort to get started so they are fairly cheap. Another nice plus that comes with an LLC is that you have fewer restrictions on how you can divvy out your money(profit sharing). In my opinion corporations actually have two of the best advantages out of all the available options. Being a corporation allows you to sell stock, so you
A Sole Trader is a business that is owned by only 1 person. They are
It is also very easy to form the limited liability partnership. It can be created by forming a partnership deed and is least expensive as well. It can also operate in multi states without getting a new permit for each state. A limited liability partnership can be formed with agreement and all or some partners may have limited
There are two types of limited companies: Private and public. Shareholders own private limited companies. Members of the public cannot buy the shares and the shareholders cannot buy or sell their shares without agreement from the other shareholders. Family owned businesses or larger businesses such as Virgin would fit into this category. Public limited companies have shares on the stock market and can be bought and sold by any member of the public, this way the company can raise further capital and expand their resources. Tesco and British Telecom are such examples. Both these types of limited companies have limited liability, which means the owners of the business are only liable for the amount they invested in the business (unless the debt is so large that the business has to be sold to repay the debt).
5). Even though there are two owners of the McGee Cake Company it is still similar to a sole proprietorship. A LLC will allow the same aspect of ownership and also the protection that a corporation has. The protection that a LLC will offer is legal protection for any legal actions brought against the organization rather than the legal action being placed solely on the owners. Also a LLC does not have to disclose financial records to the United States Securities and Exchange Commission