...Explain the forms of business. Which form of ownership would you prefer? There are 3 main forms of Business organizations a) Sole Proprietorship (b) Partnership (c) Corporation a) Sole Proprietorship In a Sole Proprietorship, there is no legal distinction between the Sole Proprietor's status as an individual from his or her status as a business owner. Although sole proprietorships are common in a variety of industries, they are concentrated primarily among small businesses such as repair shops, small retail stores and service providers such as plumbers, hairstylists and photographers. Advantages • Easiest to get started • Greatest Freedom of action • Maximum authority • Income tax advantage and Social Security advantage Disadvantages • Unlimited Liability • Death or illness endangers business • Growth limited to personal energies • Personal affairs easily mixed with business b) Partnership A partnership is an association of two or more persons who operate a business as co-owners by voluntary legal agreement. Many small businesses begin as partnerships between co-founders. Advantages • Two heads are better than one • Additional sources of venture capital • Better credit rating than corporation of Similar size Disadvantages • Death withdrawal, or bankruptcy of one partner affects business • Difficult to get rid of bad partner • Hazy lines of authority c) Corporation ...
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...I. Sole Propietership A sole proprietorship is a type of business where there is no legal distinction between the business and its owner. It is the most popular form of business in the United states. Before you decide that this is the tyoe of businwaa you want to run, you should consider the following. • Ownership- In a sole proprietorship, there is only one owner. They are in control of all areas of the business and are legally responsible for the business’s finances. Those finances would include any debts, loans, and any losses that the business has accured. The owner also revieves all the profits, however they will be taxed a tax that specific to their type of business. However if the owner dies, the business dies with the owner. In order to keep the business going after the death of an owner, there must be a living will of will that thransefers the business to someone else. • Management- Since a sole proprietorship is a small business, the owner manages it by himself. They can hire employees to help out with the day-to-day dealings of the business, but ulitimate control is the owners. They have the final say. • Finance- The owner is responsible for getting all the money needed to run a sole proprietorship. They can go to others, like the bank, relatives, or friends, for the money. Tax planning for a sole proprietorships is extremely hard. The United States has several different tax rates depending on what income is being taxed. Ordinary...
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...Legal Forms of Business There are many forms of businesses, from the small business to the corporate business that are found all over the world. Each has its own unique properties, as well as some areas that are similar to all. In this paper, I will give scenarios of the following legal forms of business: sole proprietorship, limited liability partnership, Limited Liability Company, S corporation, franchise and corporate form. This paper will also discuss the justification as to why this business form is preferred. Sole Proprietorship. Suzie owns a shop that does body wraps that helps individuals have slimmer waists and thighs. People are wrapped like mummies and the elastic wraps are saturated in a mineral solution to help assist in breaking down fat. She owns a small shop in a strip mall downtown. A Sole Proprietorship is a business that is owned by one person, and is commonly known as a small business. It is preferred by individuals who want to start their own business because they can make all the decisions regarding payroll, hiring and firing of employees ("Doing Business as a Sole Proprietor,") Business owners of this type file their own taxes. The owner can also sell the business without the approval from others, since they own the business outright. Personal liability is also a factor when opening a business as a sole proprietor. If for example, a customer gets burned by the wraps that are used and the customer sues Suzie, she will have to hire her own attorney...
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...Forms of Business Business Law/531 Forms of Business A sole proprietorship owner is liable for 100% of the business. This means that any debts of the business are also debts of the owner (Chesseman, 2010). This is a disadvantage for a sole propriety owner. Sole proprietor owner gets a tax break. The owner can file a single personal tax form. A sole proprietor is also subject to the least amount of government regulations of all business entities (Chesseman, 2010). When it comes to running this type of company, there are no legal formalities to forming or dissolving ones business. This is because there are no shareholders, investors or banks involved.When an owner of a sole proprietorship dies, the business dies with them ( Chesseman,2010). One can also convert one’s business into a partnership. In a partnership partners share profits and the losses together. Partners have shared responsibility with debts from business deals. Both partners are subject to financial liability if one partner is negligent.A partnership is exempt from double taxation. In a partnership owners can claim their portion of income generated through the business as personal income tax (Chesseman, 2010). When in a partnership, partners owe a contractual and fiduciary duty to one another (Chesseman, 2010). Partners have to trust one another because they have a fiduciary duty to each other. Partners should not borrow money, enter into secret contracts, or do anything illegal without other partners...
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...Forms of Business Erin Epps Law/531 August 1, 2011 Christine Benway Forms of Business There are a number of different types of businesses: sole proprietorship, partnership, limited liability partnership, limited liability company, S corporation, franchise, and corporate firm. Each form of business has benefits which it can provide to its owners. As a person in business it is extremely important to determine which form of business best suits the intended goals and needs. According to the State of Iowa (n.d.),“a sole proprietorship is the oldest, most common, and simplest form of business organization” (Sole Proprietorship, para. 1). It is a business which is owned and managed by a single person. This form of business is best utilized by a single individual starting a small business. A good example would be a person starting up a café. All management decisions rest with the proprietor and the business is only taxed on the owner’s income. Since any and all liability will fall on the sole proprietor, it is pertinent that, whatever the business is, it has limited liability issues. The business must be small because as a business grows it becomes more beneficial to transform into a more complex business form. According to the State of Iowa (n.d.), “the limited liability partnership is essentially a form of general partnership…whereas the partners in a limited liability partnership are statutorily provided full-shield protection” (Limited Liability Partnership, para. 1)...
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...Business Organization Forms Alyssa Wiseman Western Governors University Overview The decision to change from one form of business organization to another can be quite a daunting task. With multiple factors to take into consideration, it should not be a decision that is taken lightly. I have been hired to facilitate this process by outlining six different forms of business organizations, the key characteristics that differentiate one form from another, such as liability, income taxes, control, continuity of the organization, profit, expansion, and compliance, and their advantages and disadvantages. Below you will find a detailed report on such findings, as well as a memorandum outlining my recommendations on changing business forms. Sole Proprietorship The majority of business forms in our country fall into this category. Sole proprietorships make up almost three quarters of all American businesses and most are one-person entities (Stevick, 2006). Since sole proprietorships are generally run by a single person, all of the business’s responsibilities, decisions, and capital fall back on the sole owner. While it is known that sole proprietorships are fairly small, the primary distinctive feature is the unlimited and unshared responsibility of the sole owner (Stevick, 2006). Liability. One drawback to sole proprietorship is that, along with sole responsibility and sole decision making, liability falls solely on the owner. “Financial liability is unlimited...
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...Form 2553 Election by a Small Business Corporation (Under section 1362 of the Internal Revenue Code) (Rev. December 2007) Department of the Treasury Internal Revenue Service Note. Par t I OMB No. 1545-0146 See Parts II and III on page 3 and the separate instructions. The corporation can fax this form to the IRS (see separate instructions). This election to be an S corporation can be accepted only if all the tests are met under Who May Elect on page 1 of the instructions; all shareholders have signed the consent statement; an officer has signed below; and the exact name and address of the corporation and other required form information are provided. Election Information Name (see instructions) Number, street, and room or suite no. (If a P.O. box, see instructions.) B Date incorporated City or town, state, and ZIP code Type or Print A Employer identification number C State of incorporation D Check the applicable box(es) if the corporation, after applying for the EIN shown in A above, changed its name or E Election is to be effective for tax year beginning (month, day, year) (see instructions) / Caution. A corporation (entity) making the election for its first tax year in existence will usually enter the beginning date of a short tax year that begins on a date other than January 1. F Selected tax year: (1) (2) (3) (4) address / Calendar year Fiscal year ending (month and day) 52-53-week year ending...
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...MODULE -2 Business Organisations Notes 5 FORMS OF BUSINESS ORGANISATION ou have studied in the first lesson about the business, its significance and the classification of business activities. You are also aware that these activities are carried out by individuals in an organised form of a business house having different patterns of ownership and management. A single individual may own the business or a number of individuals may come together to own the business jointly. So, based on ownership, we have different forms of business organisation like a proprietary concern, a partnership firm or a company. In this lesson, you will learn about the various forms of business organisation (excluding a joint stock company), their characteristics, merits and limitations, suitability and the steps involved in their formation. Y OBJECTIVES After studying this lesson, you will be able to: • • • • • explain the concept of business organisation; state the meaning and characteristics of Sole Proprietorship, Partnership, Joint Hindu Family Business and Cooperative Societies. identify the merits and limitations of these forms of business organisation; describe the suitability of these forms of business organisation; and explain the steps in the formation of these business organisation. 5.1 BUSINESS ORGANISATION You have already learnt about the meaning of business and the various types of business activities like industry, trade, transport, banking, insurance etc. If you observe...
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...Forms of Business Kimberly Smith FIN231_1 February 14, 2016 Instructor McAndrew Forms of Business There are at least five different forms of business. They are proprietorship, partnership, corporation, limited liability company, and cooperative. The three major forms of business are proprietorship, partnership, and corporation. With proprietorship (also known as sole proprietorship), the business is only owned by one person. This person assumes all of the responsibility for the business. They also receive all of the profit. According to Melicher, & Norton (2014), “Proprietorships are the most widely used form although they are generally the smallest organizations in terms of assets”. Almost three fourths of firms in the United States are sole proprietorships. Partnerships are the second largest form. With this form of business, two or more people own the business. The business is for profit. Many times people choose partnership because they need to pool finances, but it is also helpful to share knowledge, property, equipment, or business skills. One person may have the knowledge to run the business, but they need someone else with the finances. In some instances, they may start off as a sole proprietorship, but they change to a partnership in order to expand their company. “A corporation is a legal entity created under state law in the United States with an unending life and limited financial liability to its owners” (Melicher, & Norton, 2014)...
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...Forms of Business Lurene Flynn Law/531 October 24, 2011 Christine J. Benway, J.D. Instructor Forms of Business Determining the type of business to open is very important in order to know the business form that will be used. Knowing the business structure is important because it determines how the business income will be taxed. This paper will discuss the different forms of business, give examples of each form, and justify why the corresponding business form is preferred. Sole proprietorship according to Cheeseman (2010) is the form of business in which the owner is actually the business: the business is not a separate legal entity (Cheeseman, 2010, p. 530). “An individual starts the business in his or her own name and does not require any special legal organization beyond the normal requirements such as licenses or permits” (Georgia Trend, 2006/2007, p. 34). Beauticians are great examples of a sole proprietorship. Beauty shops are usually owned by one person, while having other people working in them.This type of business form is preferred by beauticians or a plumber because it is easy, no formalities, and most importantly no federal or state government approval is required. According to Cheeseman (2010) the owner has the right to make all management decisions concerning the business, including those involving hiring and firing employees (Cheeseman, 2010, p. 530). A sole proprietor owns all off the business therefore he or she receives...
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...Sole proprietorship The sole proprietorship is the simplest form of business entity. Single person carrying on a business for profit. The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. The sole proprietorship is a popular business form due to its simplicity, ease of setup, and nominal cost. A sole proprietor need only register his or her name and secure local licenses, and the sole proprietor is ready for business beginning and ending the business venture are uncomplicated steps requiring little more than the decision of the sole proprietor This can be an advantage, especially when the proprietor is not certain whether he or she will wish to continue the venture for any significant length of time and thus is unwilling to spend much money on filings, legal drafting, and the like. Disadvantages: The sole proprietorship does not have any legal existence separate from that of its owner. It also removes any shield from liability that might otherwise protect the proprietor. Thus, the proprietor is personally liable for all obligations of the business Partnership In contrast to general partnership law, a limited partnership is not dissolved by the death of a limited partner, and a limited partner may not compel dissolution of the partnership absent contrary provisions in the partnership agreement partners in general partnerships are jointly and severally liable for all obligations...
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...Forms of Business When beginning a business venture, the first and most important decision made by the owner is to review the forms of business options and determine which one would be suitable for the organization of their company. There are seven forms of business that will be discussed and different scenarios that will be developed in which each of these forms of business would be the preferred form. The seven forms of business are sole proprietorship, partnership, limited liability partnership, Limited Liability Company, S corporation, franchise, and corporate form. The selection depends on many factors – Each of these forms of business has advantages and disadvantages for the entrepreneurs (Cheeseman, 34). Each scenario will also include why the corresponding business form is most preferred. Sole proprietorship Sole proprietorship is the simplest and most common form of business (Cheeseman, 530). This form of business would be appropriate for a single business owner. The business owner would be the sole proprietor in this situation. The sole proprietor would be the only decision maker on how to conduct their business, as well as would be held liable for all activities within their business and cold be at a loss for all assets if the business is not successful. For example, Kelly opens a hair store as the sole proprietor of the business. She handles all contracts made for her and to any employees that she may hire and receives all profits made from the business. Should...
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...Forms of Business There are multiple business formation options available to those looking to start a business. The type of formation depends various factors “including the ease and cost of formation, the capital requirements of the business, the flexibility of management decisions, government restrictions, personal liability, and tax consideration” (Chessman, 201) to name a few. The major forms of business organizations are general partnership, limited partnership, sole proprietorship, limited liability partnerships, limited liability company, and corporation. Having an understanding of the type of business to form depends on what the goal of the company is. Sole Proprietorship A sole proprietorship is the simplest form of business organization. The owner of the business is the business and there is no separate legal entity. Management decisions concerning the business are made by the owner without having to consort with anyone else. All the profits from the business belong to the owner. One would set up a sole proprietorship if they running a small business, such as a restaurant named after themself. The business would belong to them and is identified by their name as is the form of business. The preference for this setup would be to have complete control of the menu, restaurant décor, staff, and operation of the establishment according to only the owner of the establishment. Partnership A partnership “is a voluntary association of two or more persons for carrying on...
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...PROPRIETOR An unincorporated business owned by one person is called a sole proprietor. Others may be hired to help but the sole proprietor runs the business directly. The destiny of the company is ultimately on the shoulders of the sole proprietor. Managing, sales and finance are all performed by the sole proprietor. There is no need for any formalities or agreements when the business is run by one person. The characteristics of a sole proprietorship are the adequacies of credit and capital for the business is relatively small. The sole proprietor doesn’t share any responsibilities. ADVANTAGES * It is very easy to start a sole proprietorship. * State and local licenses and permits are the only legal forms needed. * A sole proprietor can start and terminate a business for whatever reason. * Work cannot be criticized by any bosses. * Decisions do not need to be made with a partner. DISADVANTAGES * The owner of the sole proprietorship, capital is limited by personal finance. * Fund raised from outside investors is difficult for a sole proprietor. * Talents and ability of a sole proprietor is limited. * If the owner gets sick or disable, the sole proprietor’s business will possibly decline. * Unlimited and unshared liability is the responsibility of the sole proprietor. GENERAL PARTNERSHIP With a voice in how the company is operated, each partner is fully active in the general partnership. The scope of all business activities are acted on...
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...Law 531/ Business Law Legal Forms of Business As an entrepreneur one of the most important decision to make, when starting a business is the legal form of the business. In making this decision many factors are taken into consideration, such as financial resource for business, government rules and regulation, and personal liability. In this paper a discussion regarding the different forms of business including scenarios of these form and explanation on why this corresponding business form is preferred. Sole Proprietorship According to Cheeseman (2010), a sole proprieship is the simplest form of business organization and there is no separate legal entity. (p. 530). Under sole proprietorship the business is owned and executed by a single person. The proprietor makes all the management decisions and has authority to receive profits. Sole proprietorship business could easily be sold or transferred if the owner choose, no other approval is necessary. Scenario: A small neighborhood businesses, sometimes called, neighborhood store, are an example of sole proprietorship. Creating a sole proprietorship is easy and low cost with no government approval is required at the federal and state level. A license to do business within the city is required at the state level. This form of business is excellent for a person with limited amount of money to start a small business, Sole proprietorship is responsible for business’s contract and torts committed, The sole proprietorship has...
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