Ben Is looking to start his own business and he has an investor; he also has some money set aside however, he does not have enough. we will be looking at the pros and the cons of going into; a sole proprietorship, a partnership, a corporation, a subchapter corporation and a limited liability company. We will then decide which one will give him the least amount of liability and the most about amount of control over the company with the investor acting only as a shareholder and not as an active member A soul proprietorship is the most simple structure of business to create and manage. The amount of paperwork and tax reporting is also very simple; no need to worry about annual meetings, annual fees, formal financial statements are ensuring your personal and business finances are separate the government doesn’t make any separation between the money you earn in the amount your sole proprietorship Menkes which takes a lot of headache out of tax season. With all of these pros come some serious cons ,such as the fact that there is no separation between the owner in the business meaning if your sole proprietorship business loses money or is said the banks and credit loaners come straight for your personal assets you are also unable to expand there is no room for investors partners or business loans these expansions require a much more formal business structure also in the eyes of partners you are considered less legit and dependable than an LLC or Corporation therefore less people are willing to invest in your company. Similar to a sole proprietorship a partnership can be started easily and is easy when he comes to taxes in filing each partner is taxed according to the amount of sharing the holding the business this also means profits ar... ... middle of paper ... ...s share of profits is distributed. if the members bottom line is not considered earned income because they are not active members and cannot receive the favorable fringe benefit .as a member of an LLC you may not pay yourself wages. After looking at the pros and the cons of several different types of corporations I have found that the only two options that will work best for his type of situation is going to be either a S Corporation or an LLC. both of these options will give him limited liability with full control, allowing the shareholder or the investor to remain simply an investor however in order to enter into an S corporation or LLC both parties must be 100% in agreement. I know that when it comes time for me to start my own business I'm definitely going to be looking into starting an LLC with some type of investor, me acting as the main managing member.
Partnership – “A legal entity formed by two or more co-owners to operate a business for profit.” (Longenecker, Petty, Palich, Hoy, Pg. 202) In a partnership, the advantage for the owners is the capability to reduce the workload and the financial burden, especially if each partner has management skills that enhances the business. The disadvantages of a partnership such as personal conflicts and leadership expectations, therefore this organizational form should only be chosen once all other options have been considered.
There are many different types of business structures, but if you own and operate a business that it is a sole
A partnership is an association of two or more people who typically know and trust each other and therefore come together to set up and carry on a business. The partners have an equal control over the company’s affairs and typically contribute an equal capital amount. Incomes and losses are also equally shared . A trust is an obligation given to an appointed person, the trustee, to hold the assets and property of the business on behalf of the others who are termed as beneficiaries. The trustee could be a company, sole trader, partnership of individual and has the discretion over running and managing the trust including matters such as investments, debt, and income generation. The beneficiaries are all those who receive the income or incur expenses. A limited liability company is a complex business structure whereby it is a separate legal identity, separate from the partners. The company is owned by the shareholders and managed by the directors.
According to Mary Hanson (1998) no agreements are required to form a partnership, but if preferred you may write an agreement up. The most convincing idea of a partnership is the ease that a partnership may be created and handled. Within a partnership registration with the state and fees are not needed, as they would be within an established business or a limited liability company (LLC). Within a partnership taxes are done easier as there are no taxes on the “partnership” rather only the partners, so there is no reason to file separate tax returns for the business and the owners (All Business, 2012). Benefits of partnerships are also that the “partners” are free to establish their own set of rules and the obligations each partner has to do to keep the business running; whereas, an established corporation or LLC, there is a set of rules the state has established for the company to abide by.
Partnership is generally straightforward and need low costs to be framed it just require an understanding between the parties. All partners evolve in the administration and making the decision as they all have the right to help in any decision. As they are a number of partners that implies they have a much greater source of funds than a sole trader. On the other hand, the Disadvantages of partnership are that it doesn 't have a legitimate identity of its own. The survival issues, as the partnership will be broken up in light of the death of the partner or regardless of the fact that the partner went insolvency. Endless obligations, where the debts in partnership might be taken generally as it could be taken from their own assets to settle the
Partnerships rely on special bonds and trust between another individual which can have many advantages and disadvantages towards a company. Some advantages would be easier paperwork load, easy to start up, and taxes are simplified. From AllBusiness, the article claimed, “The biggest advantage of a general partnership is the tax benefit...Creating a general partnership is simpler, cheaper, and requires less paperwork”. In other words, a partnership can be less of a hassle considering you have another person to share the workload. Major disadvantages towards this formation would be management issues and liable debt. Specifically, like sole proprietorship, the debt of the partnership would be shared among the owners. Also, management problems can occur if the relationship between the owners are not strong causing someone to back out of the business or to lose a friendship. An example of a partnership ship would be the ice cream company Ben & Jerry's. A business that started out with two guys and a $12,000 investment back in 1978 and as the business grew so did their company. Ben & Jerry's selection of becoming a partnership has allowed the ice cream company to thrive for almost over 40 years. The relationship formed between Ben & Jerry's has allowed their ideas to be spread not only locally but internationally with the help of putting trust into someone else and taking some of the stress off as
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
To understand the four type of business forms I compared and contrast the four business formats which are a sole proprietorship, general partnership, corporation, and limited liablilty company (LLC), also why he or she should select one form over another.
5. Taxes – LLC can decide to be taxed as a sole proprietor, partnership, S-corporation or C-corporation, providing much flexibility and choices known as “check-the-box taxation”. Under the default tax classification, profit is taxed at the membership level and not at the LLC level (non-double taxation)
from: a sole proprietorship, a partnership, and a corporation. This paper will explain the strengths
Many business owners decide that the initial ownership is either a sole partnership or if ...
The profit is not split among partners, or split among corporations. So when you own your own business, you’re the first and only one that receives all earnings and profits. So if a person has a successful firm, he/she is the first to reap the success and rewards. 2) Another advantage of owning your own business is that you’re your own boss.
Corporate Entrepreneurship can be seen as the process whereby an individual or a group creates a new venture within an existing organization, revitalizes and renews an organization ,or innovates. Zahra’s(1986) definition of corporate entrepreneurship suggests a formal or informal activity aimed at creating new businesses in established firms through product and process innovations and market developments,whereas sathe(1985) defines corporate entrepreneurship as a process of organizational renewal. Corporate Entrepreneurship has emerged as a much needed ingredient contributing towards the growth of any organization under a changing business environment.
Partnerships in general are easier to create, but there has to be a consensus between all partners in the form of a written agreement. At a minimum they all have to decide financing, who will do the work, not to be morbid, but the questions have to be asked about what if a named partner dies. Cold but it is a reality that many partnerships face. One disadvantage of a partnership is the decision making, unlike the sole proprietor, a partner has to obtain consensus from all named parties. You will have to become very
The next step in becoming a successful entrepreneur is to decide what form of business ownership you want. The main options would include sole proprietorship, partnership, or corporation. (pg. 104). With any of these three forms of ownership, there are positives and negative. You would need to look into all of the options and based on your company decide which one is best for you to become