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Difference between sole proprietorship and partnership and corporation
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Sole Proprietorship
Is the most common business type, where the business is operated and owned by a single individual. In this type of business, the sole proprietor provides capital, does not share profit or loss and runs the business alone. As such, the business and the owner are indistinguishable for tax and legal purposes (Dlabay, 2011). To differentiate this business from other business types, a sole proprietorship is discussed under the following characteristics.
i. Liability: Incase of business debts, the owner is liable personally-unlimited liability. The assets of the business owner can be taken to pay off business debts since the two are not distinct (Dlabay, 2011). This is the major limitation of a sole proprietorship. ii. Income Taxes: Since the business owner and the business are indistinguishable, the proprietor is taxed at personal tax rate. It is significant to note that some expenses can be deducted before arriving at taxable income (Dlabay, 2011). iii. Longevity: In case of incapacity or death of the owner, the venture dies. The assets of the business are passed to personal representatives or trustees, who administer the estate and settle any obligations of the business. This is a disadvantage of sole proprietorship in that there is no continuity (Dlabay, 2011). iv. Control: A sole proprietor runs and makes decisions autonomously. This is an advantage in that making decisions is easy as no consultations are required (Dlabay, 2011).
v. Profit Retention: a sole proprietor owns the business alone and thus retains all profits alone. On the flipside he absorbs the losses alone. vi. Location. This form of business does not require state filings. Thus, the sole proprietor can relocate the business at will...
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...ess as stipulated in the state law. iv. Control: LLC has unlimited members. However, admission of new members must be obtained from the other members. In addition, unlike an S-corporation, LLC allow even foreign members.
v. Profit Retention: Profit is normally shared according to predetermined terms that may be stipulated in LLC operating agreement (Dlabay, 2011). vi. Location: Similar to other corporations, LLC can be registered in any state as a business including the state where it is physically located. If the LLC wants to be registered in another state it must meet the qualifications of a foreign entity. Also, necessary files must be filed and local and state taxes must be paid (Dlabay, 2011).
Reference
Dlabay, L. R., Burrow, J., Kleindl, B., & South-Western Cengage Learning. (2011).Principles of business. Mason, OH: South-Western Cengage Learning.
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
persons as partnership change to sole proprietorship due to personal case. This will affects the
Existing as an LLC, the company could maintain perpetual existence. An LLC can still be dissolved upon death, withdrawal, resignation, or bankruptcy of a member, unless you have provided for these situations in either a written operating agreement between the members or the articles of organization.
federal legal licensed. In opinion, this is a good start, but if they really wanted to, anyone could
So how do businesses like Ashley Furniture or General Motors (GM) use their assets to attempt to pay off their creditors and any other liabilities? Companies like these first have to file for a voluntary petition of bankruptcy through Chapter 7 otherwise known as liquidation. In this process the debtor is appointed a trustee who allocates his/her assets and equally distributes it to the creditors. Reorganiza-tions also known as Chapter 11 each company or organization must first file for bankruptcy. Failure to properly file for bankruptcy a creditor can potentially force a debtor into an involuntary bankruptcy if repayment of certain debts is not made in a timely manner.
There are many different types of business structures, but if you own and operate a business that it is a sole
It has been said that the most popular reason why a company is formed is to take advantages of the limited liability principle. However, we must also consider that although a company is a separate legal personality, it can have unlimited liability, that is, the shareholders may still be liable for the company’s debts.
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.
Finally I will state whether or not I agree with the given statement.cobd bdr sebdbdw orbd bdk inbd fobd bd. When a company receives a certificate of incorporation it has a 'separate legal personality'. In law the company becomes a legal person it its own right. The fundamental concept to become familiar with when starting up a business is the idea that the business has a legal personality in its own right, particularly when it assumes the form of a limited liability company. This essentially means that if one commences business as a limited liability company, then the corporation... ...
When two or more persons form a partnership to jointly operate as owners of the business, not only they would share in both profits and loss but also a mutual obligation to each partner. An obligation entails a corresponding right and duty deriving from a legal bond or tie between the obliged and the obligee; and this relationship is interdependent. Partnership in English Law works by way of a matrix of reciprocal agency agreements between each partner and his co-partners generally creating similar obligations. Although the fact of partnership entails the existence
Insolvency occurs when a debtor’s estate consists of more liabilities then assets and as a result, the debtor cannot pay his debts. There are two methods in which sequestration of a debtor’s estate can take place these are through voluntary sequestration and compulsory sequestration.
There are many advantages and disadvantages when owning your own business. When you own you own business, it’s known as a sole proprietorship. But with any type of business, there will always be advantages and disadvantages.
...onclusion, registering a business is no easy task. To create a business involves a lot of time, effort and devotion towards building a company that might even take years to become profitable. With the right business idea, plan and financing one can lay the groundwork for a successful business.
The resource of a business that owner own are called assets for example building, machinery etc. In other words we can say the thing that owned by a person a regard to company and having value, commitment and legacies.
The definition of a sole proprietorship is essentially a business that is run by one person and owned by that person as well. Specifically, a sole proprietorship is separated from the other business entities because of the specific the legal dynamics between the business and the owner of the business. Moreover, because of this factor, sole proprietorships are usually easy to both form, maintain as well as dissolve if need be. In a New York Times article, the authors expressed that small businesses are typically sole proprietorships and as such, this is why it was selected as the business entity (1). Furthermore, the aforementioned reasons allowed for a rather rapid decision on the basis that with this entity, there is an ability of the owner to run it how they see fit.