Types Of Business Organizations, Partnerships, And Corporations

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When forming a new business a structure, or type of business organization, must be chosen. Sole proprietorships, limited liability companies (LLC), partnerships, and corporations are four major types of business organizations. Each type of organization has advantages and disadvantages. The first type of business organization is a sole proprietorship. A sole proprietorship consists of one owner who operates to company. (S.O.E.M.I., 2010, pg. 126, para. 2) A sole proprietorship is sometimes viewed as the simplest structure. (S.O.E.M.I., 2010, pg. 126, para. 2) There are advantages to a sole proprietorship. One advantage is that you are the only owner and the boss. Another advantage is taxation, which is appealing. (S.O.E.M.I., 2010, pg. 126, para. 3) With taxation in a sole proprietorship, company expenses and your income are reported on your personal income tax return. (S.O.E.M.I., 2010, pg. 126, para. 3) Another appealing part to taxation is that a sole proprietorship company’s business earnings are only taxed once. (S.O.E.M.I., 2010, pg. 126, para. 4) While the taxation is appealing, there are disadvantages to a sole proprietorship. One being that banks may be reluctant to grant a business loan to an individual. (S.O.E.M.I., 2010, pg. 127, para. 2) Also, with one individual being the owner, the owner is personally liable. (Nash, 2010, pg. 1, para. 3) The owner is liable for the company’s debts and his or her assets could be taken to settle any debt. (Nash, 2010, pg. 1, para. 3) A final disadvantage is since a sole proprietorship only has one owner, the company will cease with the death of its owner. (Nash, 2010, pg. 1, para. 2) Which does not guarantee a long term life for the company. (Nash, 2010, pg. 1, para. 2) A second typ... ... middle of paper ... ...) S corporations also have some advantages over general corporations. S corporations have better tax benefits than a c, or general, corporation. (S.O.E.M.I., 2010, pg. 130, para. 4) S corporations pass income and losses to shareholders to be included in personal tax return so there is only one federal tax to pay. (S.O.E.M.I., 2010, pg. 130, para. 4) S corporations can also have up to one hundred shareholders, which creates more investors and capital. (S.O.E.M.I., 2010, pg. 131, para. 1) Just like c corporations, there is a disadvantage to s corporations. S corporations also fall into the same heavy state regulations as c corporations and have high legal and tax-preparation service costs. (S.O.E.M.I., 2010, pg. 131, para. 2) S corporations and c corporations have similar high start-up and operational costs but differ on taxation. (S.O.E.M.I., 2010, pg. 131, para. 2)

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