...GM520 Professor: ABCD Introduction A corporation is a legal entity that is created under the laws of a state designed to establish the entity as a separate legal entity having its own privileges and liabilities distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter (i.e. by an ad hoc act passed by a parliament or legislature). Most jurisdictions now allow the creation of new corporations through registration. An important (but not universal) contemporary feature of a corporation is limited liability. If a corporation fails, shareholders normally only stand to lose their investment and employees will lose their jobs, but neither will be further liable for debts that remain owing to the corporation's creditors. Sole- Proprietorship A business structure in which an individual and his/her company is considered a single entity for tax and liability purposes. A sole proprietorship is a company which is not registered with the state as a limited liability company or corporation. The owner does not pay income tax separately for the company, but he/she reports business income or losses on his/her individual income tax return. The owner is inseparable from the sole proprietorship, so he/she is liable for any business debts also called proprietorship. A business can be set up in a variety of ways, ranging from a sole-proprietorship to a general partnership...
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...corporation. In addition it provides information on the professional responsibilities of Certified Public Accountants (CPA’s). Finally, a distinction is made between a financial audit and a financial review. The Methodology used to Determine Deferred Taxes It is common knowledge that companies report different amounts of income on their income statements and tax returns respectively. This difference is caused by the fact that taxable income is determined on the cash basis of accounting using the internal revenue service (IRS) code; whereas the pre-tax income reported on the income statement is determined on the accrual basis of accounting using generally accepted accounting principle (GAAP). This difference in accounting basis causes the differences in the amounts reported on the income statements and the tax returns. This temporary difference is responsible for deferred tax liability or asset that is recorded on a company’s balance sheet. Therefore, where the amount of taxes payable in the future years is known, it must be accrued and reported on the balance sheet as a deferred tax (Kieso, Weygandt, & Warfield, 2008). Procedures for reporting accounting changes and error corrections When a company changes the accounting principles that it has hitherto used to report a class of transactions to another principle, there is said to be a change in accounting...
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...Organizational Forms | | | | The following report will summarize the key differences between the various forms of legal business entities. The ownership forms covered will include sole proprietorship, general partnership, limited partnership, C-corporation, S-corporation, and Limited Liability Company. Also included will be a brief recommendation of the most appropriate form of ownership for the given manufacturing business. | Section A- For each of the various forms of business ownership, a brief description outlining the basic impact on the following criteria will be given; * Liability * Income Taxes * Longevity or continuity of the organization * Control * Profit Retention * Location * Convenience or burden Sole Proprietorship Perhaps the most common form of business ownership, sole proprietorship, is generally the simplest form of business ownership due to the lack of separation between the entity and the individual. While there are positive and negative implications to any form of business ownership, these are generally more exaggerated in the instance of sole proprietorship. The ease of formation and ownership and limited regulation are strong benefits, however, the negative aspects are far greater than in any other form of ownership. The first negative ramification is the lack of ability to continue the company after the owner either becomes unable or chooses not to continue the business. This may seem like a minor inconvenience...
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...length is 2000 words. 5. This paper is due on Friday 19thAugust 2011 by 5pm. Question 1 Introduction to Companies King Kong is a very successful large banana wholesale business owned by Mr Ken Kong. The price of Bananas significantly increased in the last financial year and as a result Mr Kong earned more than 20 million dollars in the last financial year. His accountant suggested that he reconsider his business structure and advised him to incorporate. Although his accountant tried to explain the differences between a proprietary and public company, and the different types of corporations, he didn’t understand him. You are a family friend of the Kong family and he calls you up to explain the different types of corporations and the differences between proprietary and public companies. He also wants to know that if he changes his mind in the future, whether he would be able to convert to a different company status at any time. Assist Mr Kong by answering his call. End of Assignment one. Hi Ken, As per suggested by your accountant, a company structure for your business is most recommended given its recent increase in profits. The main benefits of a company structure for you are its tax advantages and the fact that it provides limited liability to its owners. By setting up a company, the profits from King Kong will be taxed at a flat company tax rate of 30%. This is a much lower tax rate as...
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...2014 Assignment Topic “The Company at Law is Distinct from its Members. Directors are neither Agents nor Trustees of the Company” Prepared For Barrister Shaheen Ahmed Lecturer School of Business North South University Prepared By Shahriar Hasnaine Sakib ID- 111 0261 030 LAW 200 Section: 07 Date of Submission July 15, 2014 Contents TABLE OF CONTENTS Objective 3 Introduction 3 Company’s Classification and Characteristics 3 Separate legal personality 4 Consequences of treating the company as a separate legal entity: 5 Company has a Distinct Entity from its Members 6 Agent & Trustee 6 Directors 6 Analysis to the Leading Cases 7 Salomon v. Salomon & Co. 7 Lee and Lee’s Air Farm’s Ltd 8 Macaura v. Northern Assurance Co Ltd 8 DHN v Tower Hamlets London Borough Council 9 Lubbe v Cape Plc [2000] 9 Some Other Famous Cases: 10 Paul v. Virginia (1869) 10 Berkey v. Third Avenue Railway Co 10 Adams v Cape Industries plc [1990] 10 Walkovszky v. Carlton 10 Findings 11 Conclusion 11 Bibliography 12 Objective ‘’A company is distinct from its members. Directors are neither agents nor trustees of a company’’ The purpose of this Assignment is to analyze the legendary statement made by Lord Mac Naughton during the Salomon vs Salomon case on corporate personality, in the lights of some leading cases. The statement of Lord Mac Naughton was “The Company is at law a different person altogether from its members, the company is not in law agent of the subscribers...
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...moral factors. 5. Government policy. Steps in the decision making process: 1. Establish goals. 2. Gather available information on alternatives. 3. Determine consequences of alternatives. 4. Choose a course of action. In a complex society decision makers have to rely on data supplied by specialists. The accountant (as a specialist): o Is involved in steps 2 and 3 of the decision making process; o To offer advice regarding step 4; and o To measure the outcomes or consequences of the decision-making process. 2. Accounting Defined “The process of o Identifying - observing economic events and determining which of those events represents economic activities relevant to a particular business; o Measuring; o Recording – classification and summarisation; and o Communicating – preparing and distributing accounting reports economic information to permit informed judgements and economic decisions by users of the information”. 3. Users of Accounting Information The first objective of accounting is to provide information in reports which can be used by internal and external decision makers. Internal decision makers (Management Accounting): o Information is presented to management in the form of special-purpose financial reports. o Special-purpose financial reports are prepared for users who have specialised needs and who possess authority to obtain information to meet those needs. External decision makers (Financial Accounting): o...
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...moral factors. 5. Government policy. Steps in the decision making process: 1. Establish goals. 2. Gather available information on alternatives. 3. Determine consequences of alternatives. 4. Choose a course of action. In a complex society decision makers have to rely on data supplied by specialists. The accountant (as a specialist): o Is involved in steps 2 and 3 of the decision making process; o To offer advice regarding step 4; and o To measure the outcomes or consequences of the decision-making process. 2. Accounting Defined “The process of o Identifying - observing economic events and determining which of those events represents economic activities relevant to a particular business; o Measuring; o Recording – classification and summarisation; and o Communicating – preparing and distributing accounting reports economic information to permit informed judgements and economic decisions by users of the information”. 3. Users of Accounting Information The first objective of accounting is to provide information in reports which can be used by internal and external decision makers. Internal decision makers (Management Accounting): o Information is presented to management in the form of special-purpose financial reports. o Special-purpose financial reports are prepared for users who have specialised needs and who possess authority to obtain information to meet those needs. External decision makers (Financial Accounting): o...
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...LEGAL FORM OF BUSSINESS In this paper we will compare and discuss different forms of business and their advantages and disadvantages. Following are the different type of business formed to conduct work: 1. Sole proprietorship. 2. Partnership. 3. Limited liability partnership. 4. Limited liability company. 5. S corporation. 6. Franchise. 7. Corporate. 1. Sole proprietorship, The sole proprietorship is a type of business entity that is owned and run by one individual. All the decisions of the business are made by that individual and there is no legal distinction between that individual and the business. Following are the advantages and disadvantages of Sole proprietorship Advantages They have the ability to raise capital either publicly or privately. To limit the personal liability of the officers and managers. Limit risk to investors. Sole proprietorships have the least government rules and regulations affecting it. Owners have complete control over all the aspects of his or her business. The owner can take any managerial decisions that he/ she wants to take. Disadvantages Raising capital for a proprietorship is more difficult because an unrelated investor has less peace of mind concerning the use and security of his or her investment . The investment is more difficult to formalize other types of business entities have more documentation. The enterprise may be crippled or terminated if the owner becomes ill. The business is the same legal entity...
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...The Report Sole Proprietorship: * Liability - Unlimited Liability, the owner is personally liable for all the business debt and obligations. There is no legal distinction between owner and business. * Income Taxes - Tax planning can be difficult to take advantage of lower income tax rates, due to all the income generated by business is treated as personal income. * Longevity/Continuity - As long as the owner is alive the business can continue. * Control – The owner has full autonomy of the business. * Profit Retention - All the income generated from the business belongs to the owner. * Location – The owner has full autonomy of the location. * Convenience/Burden - The convenience of a sole proprietorship is its easy to start a business, you have full autonomy of the business and you have totally ownership of the finances. The burden of a sole proprietorship is the owner usually suffers the highest rate of taxation and unlimited liability for business debt is a major burden. General Partnership: * Liability - Every partner in the partnership is jointly and severally liable for the partnership’s debts. * Income Taxes - The partnership is considered a disregarded entity for tax purposes, so income “flows through” the business to the partners, who then pay ordinary income tax on the business income. * Longevity/Continuity - As long as both partners are getting along the business could last a long time. * Control – The partners...
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...of the organizers. The most common methods of business operations are as sole proprietorships, partnerships, limited liability companies and corporations. As such, after careful review and revision of the different business organizations, I have decided that I would establish a Limited Liability Company (LLC). A Limited Liability Company, quite simply is a company whose liability is limited. That’s the short version. The longer version is that a limited company is a type of company which when set-up allows an entrepreneur to keep their own assets and finances separate from the business itself. This means that people who have invested in the business (the shareholders) are only responsible for any company debts up-to the amount that they have invested and no more. It is therefore a good way for a business to get investment and run without risk to a personal wealth. Essentially a Limited Company is seen as an entity in its own right, which can be subject to legal action. As a separate body, a limited company can even be the director of another company. The Company Types * Public Limited Companies – also known as PLC’s, Public Limited Companies are businesses which have been established with at least two (2) shareholders with at least £50,000 worth of shares issued. * Private Limited Companies – are similar to public companies but can be run with just one member and cannot...
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...Legal Forms Of Business Business Law/531 September, 17th 2012 Introduction There are several forms of business an entrepreneur can choose from when starting a new business. Most organizations choose to start up with a sole proprietorship, a partnership, (LLC) limited liability or a corporation. When deciding which legal form is best for your company, one must understand how each legal form works, then choose the right one that best fits the company’s needs. If a company is unsure of which form to choose from it is best to seek some legal guidance or an accountant? Small businesses may want to start with a sole proprietorship or partnership, mainly because personal liability is not a huge concern. These two forms are less complicated and inexpensive to start up and sustain. Corporations on the other hand are more complicated, cost more and are harder to form, however depending on the small business they may want to choose limited liability instead. Making the decision when choosing between LLC and cooperation factors on, incomes tax rates, personal liability, business debts and court judgments. Franchising a business is a way to expand a small business to the next level. Expanding is never easy but the best way to start is to make sure your company has enough money to pay for the expansion. When a company decides to expand they must make sure it will be profitable and get the businesses name out there. (Elgin, Jeff. September 1st 2002) Scenario 1 Mike and John wants...
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...one must look past just the idea or hopes of opening a small business and think about the legal, tax, accounting, and other items that need to be addressed in establishing a small business. One of the first things to consider is, as what type of entity the company will be chartered or established, and what rules apply for the state in which the company is located. For the purposes of this paper, the potential small business owner will use the State of Colorado as the state in which the company will be headquartered and Colorado Springs as the city. The business that will be established is a high end pawnbroker in the north end of Colorado Springs. In establishing a business in Colorado Springs, Colorado, one must look at the local, state and federal ordinances and laws in establishing a business. The business owner must also decide on how the company will be registered in Colorado such as Sole proprietorship, Partnership, C corporation, S corporation, or an LLC – Limited Liability Company. This paper will show the advantages and disadvantage of each of these entities as it relates to a pawnbroker business, while also examining the different types of financial statements associated with each business entity and consequences such as tax, accounting, and legal implications. The final section of the paper will explain the reasoning behind the start up of a pawnbroker store, the classification chosen and why this choice was made for this new business. Sole Proprietorship This type...
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... 2 US financial reporting will change significantly within the next several years An in-depth discussion 4 Examining the implications IFRS affects US businesses in multiple ways What this means for your business 6 Anticipate and manage the change What companies can and should do now October 2012 The heart of the matter US financial reporting will continue to change over the next several years Although US companies will not when, and how IFRS might be be permitted to use International incorporated into the US financial Financial Reporting Standards (IFRS) reporting system. for US public filings in the foreseeable • In May 2011, the SEC’s Office of future, IFRS has been affecting US the Chief Accountant published a companies for some time, primarily Staff Paper exploring one possible through engaging in cross-border method to incorporate IFRS merger-and-acquisition (M&A) into the US financial reporting activity, meeting the reporting needs system, involving an active of non-US stakeholders, and assisting Financial Accounting Standards with or monitoring of the IFRS Board (FASB) incorporating IFRS requirements of non-US subsidiaries. into US GAAP over an extended US companies are also becoming period of time (the “endorsement” increasingly aware of IFRS, as key method). Under this method, the aspects of US generally accepted FASB would remain the US stanaccounting principles (US GAAP) dard setter and potentially endorse and IFRS continue to be the...
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...GLOSSARY OF FOREIGN DIRECT INVESTMENT TERMS AND DEFINITIONS This glossary forms part of the 4th Edition of the OECD Benchmark Definition of Foreign Direct Investment and is intended to assist both the compilers and users of direct investment statistics. Acquisition An acquisition is a business transaction between unrelated parties based on terms established by the market where each enterprise acts in its own interest. The acquiring enterprise purchases the assets and liabilities of the target enterprise. In some cases, the target enterprise becomes a subsidiary or part of a subsidiary of the acquiring enterprise. In principle quantitative or qualitative information directly concerning multinational firms could be classified under activity of multinational enterprises. However, within the framework of the OECD Handbook on Economic Globalisation Indicators, data on the activity of multinationals covers all economic and industrial data which are not associated with FDI, portfolio or other financial transactions. Data collected by the OECD within the framework of the surveys on the economic activity of multinationals include 18 variables, notably gross output, turnover, value added, number of people in employment, employee compensation, gross operating surplus, gross fixed capital formation, R&D expenditures, number of researchers, total exports and imports, intra-firm exports and imports, and technological payments and receipts. Affiliated enterprises are enterprises in a direct...
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...accounts, information about common stock, summary of significant accounting policies, descriptions of subsequent events and related third-party transactions. The balance sheet includes the entity’s assets, liabilities and shareholders’ equity. The balance sheet has many components and is used to help portray the company’s financial position. ”Of all the financial statements issued by companies, the balance sheet is one of the most effective tools in evaluating financial health at a specific point in time.” (Schmidt, 2013) The balance sheet is also called the statement of financial position. It includes the assets, liabilities and shareholders’ equity for the entity. “A company’s balance sheet provides a snapshot of the assets it owns, liabilities it is responsible for, and whatever might be left over when subtracting assets from liabilities that represents owners' capital or shareholders’ equity.” (Fuhrmann, 2013) It is useful in providing information to assess the entity’s financial future. Though it is helpful in assessing the company’s future, it does not depict the market value of the entity. It does provide valuable information that can be used to judge the entity’s ability to pay its current obligations and judge its market value. “Financial position, as it is reflected by the records and accounts from which the statement is prepared, is revealed in a presentation of the assets and...
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