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
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
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
A sole trader is a one man business. There is just one manager. Although they are the sole manager and owner they can employ staff to work for them. They can employ as many as they want to work for them. A sole trader is self employed, this means they work for themselves, they employed themselves, they for nobody. Sole traders trade with others. They may trade expertise, an example of this would be a business consultant taking on a big job and needing an extra hand just for that job, so this person may employ a person with the expertise he/she needs. Because a sole trader is the sole owner he/she keeps all the profits, unless he/she has any employees. The owner of the business makes all the decisions, he/she will not have anyone telling them what to do. When one wants to set up a sole trader business it is relatively easy. There is little paper work involved bec...
Rath, T. (n.d.). Consider the Tax Implications of an LLC Before You Create. Retrieved May 2015, from about money: http://sbinformation.about.com/od/ownership1/a/llctax.htm
Mallor, Barnes, Bowers, & Langvardt (2010) state that the Board of Directors also, issues shares, Adopts articles of merger or share exchanges, Proposes amendments, Proposes dissolution, Declares dividends, and Sues wrongdoing directors (p. 1110) .... ... middle of paper ... ... The type of corporation I would like to work for or be part of depends on my position within the company therefore I do not think one is better than the other.
A sole proprietorship is characterized a business in which one individual (sole proprietor) controls the administration and benefits (Kubasek, 2014). A sole proprietor is the single individual at the leader of
During the eighteenth century, corporations had fewer powers that we do now. They did not have limited liability. They were chartered for a limited period of time, (10 or 20 years), and for a specific public purpose only, such as building a bridge. Corporations were viewed differently in early times. They were thought to be good ways to serve the public good. But over the time, people forgot that corporations are starting to get so powerful and that they need to be strongly controlled. Also, corporations began to gain more power than the wealthy elite. Corporations like the East India Company and the Hudson Bay Company had been the rulers of America. So when the constitution was written, corporations were left out of the Constitution. From the past, corporations had been looking for a way to control state regulation and taxation. They did, by being able to control it by having the federal government say you can't discriminate, when discrimination meant any rule that applied just to corporations, such as railroads. Because Corporations cannot be trusted to voluntarily protect the environment, they require regulation.
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.
There are many different types of business structures, but if you own and operate a business that it is a sole
A Sole Trader is a business that is owned by only 1 person. They are
Sole tradership is when the business is fully owned and managed by one person, though others can be employed to help run the business. As the sole traders only financial income is from the business and/or bank loan, they do not have the resources to expand and cover regional or national areas. These types of businesses are located in the small business sector and usually cover local areas. Such businesses could be hairdressers, corner shops or market stalls etc. Sole traderships have unlimited liability so if the business fails to pay its debts the financial responsibility falls on the owner/s to pay the debts in full even if they have to sell their business, personal possessions and assets.
Sole trader is a person that is self-employed . He or she runs the business on their own and has sole responsibility for its success or failure.
Before a partnership formation is imminent, the business needs to decide on which type of partnership to form. There are three types of partnerships: (1) general partnerships, (2) limited partnerships, and (3) joint ventures. All three partnerships contain two or more owners, but all partners assume equal division of ownership, liabilities, and profits in a general partnership. Limited partnerships offer limited liability protection based on each partner’s contribution percentage. Joint ventures are classified as general partnerships with limited existence periods. Once a type of partnership has been determined, the business fulfills a series of requirements before the partnership can be successfully formed. The first step is to register
An additional advantage is that a sole proprietorship can be easily organized. It’s easy to start your own business. First of all, it costs very little money to start your own business. As a sole proprietor, you have minimal legal requirements. The owner doesn’t have to establish a separate legal entity.
Sole proprietors because they are the owners, do not have to pay business taxes, however, the owner must pay taxes on the income that is collected from the business as a part of his or her own personal income taxes. Despite the fact that the business is owned and run by the sole proprietor, there is a definitive need to comply with any licensing requirements in the particular state where the owner is doing business. This includes zoning ordinances, local regulations as well as the necessary paperwork attributed to the business running smoothly. There is a nominal amount of paperwork associated with the sole proprietorship in comparison to the other types of business entities, which makes it an even more attractive business to operate ("Advantages and Disadvantages of Sole Proprietorships").