...Business Structures Paper Vineta Byrd FIN/571 July 23, 2013 Professor John Dewey Business Structures Paper Various business structures are available to entrepreneurs. Each of the structures have advantages and disadvantages. Therefore, individuals interested in starting a new business should be well informed on the different options available. First, one of the most common business structures are corporations. Corporations are complex and normally require professional assistance from an attorney. However, corporations allow the owners to protect personal assets from business obligations. Corporations are separate legal entities that are owned by stockholders. A corporation can have unlimited number of stockholders which makes it easier to raise capital, (Planning your business: Research, goals, and business plans (2011). Second, another available business structure is a Subchapter S Corporation (S Corporations). This structure is mostly used by small businesses. The advantages are tax savings, business expense credits, and independent life for owners. The Subchapter S Corporation allows the owners to have limited liability, but also function as a partnership or sole proprietorship. Another advantage is shareholders can easily leave the company without drastically affecting the business. The disadvantages are stricter operational processes and shareholder compensation requirements, (Planning your business: Research, goals, and business plans (2011). ...
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...Business Structure Advice ECO/561 June 11, 2015 Business Structure Advice Mr. Owner, My office received your request for advice on how to start forming your business. In response to your request, our hope is that you will find the following information helpful in the beginning stages of your business venture. To begin, it is imperative for business owners to decide which structure will work best for their company. However, one must first know their business structure options, as they can affect financial and legal liability, decision-making authority, and likely tax consequences. The possible structures of a business can be either a sole-proprietorship, partnership or a part of a corporation. A sole proprietorship is the easiest of all the structures. Should you decide to become a sole proprietor you would have complete control of the business and full authority over all business decisions. However, as the sole owner you would also be liable for any and all debts, losses, and other liabilities incurred. According to the U.S. Small Business Administration (n.d. a), “Because you and your business are one and the same, the business itself is not taxed separately-the sole proprietorship income is your income” (para. 5). This makes for easy tax preparation in addition to the benefit of having low tax rates. A partnership involves two or more individuals who have chosen to cooperatively operate and manage a business focused on developed agreements. It can be inexpensive...
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...Business Structure Advice Michelyn Johnson FIN/571 July 7, 2014 William Mellett Business Structure Advice Many entrepreneurs will make the decision to start their own business and work for themselves. By doing this they must develop a business plan and decide on what business structure to use. Below is an email from an aspiring business owner asking for guidance on which way would be the best to start up and finance his business. Dear Consultant, I am currently starting a business and developing my business plan. I'm in need of some advice on how to start forming my business. I am not sure exactly how it will be financed and whether or not I want to take on partners. I am interested and willing to learn the intricacies of my options to determine how to best proceed with my plan. Please advise on what my options are, the advantages and disadvantages of each, and possible tax consequences for each scenario? Respectfully, John Owner The below response will explain to John Owner the different types of business structures there are, the advantages, disadvantages of each, as well as any tax perks or consequences. Business Structure Sole Proprietorship The simplest common structure of business is a sole proprietorship. This is “an unincorporated business owned and run by one individual with no distinction between the business and you, the owner” (The U.S. Small Business Administration, 2014). As long as you’re the only person that owns the business there is...
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...Business Structure Advice Jennifer Yacovazzi FIN/571 May, 12, 2014 William Stokes Business Structure Advice In beginning a business people will start one for a variety of intensions. Some people think they have a merchandise or service that will transform a business or make them wealthy. Others might live in an area where there is no job openings, and starting a business is the only way to earn a living. Other people simply want to be their own boss. Whether any of these reasons can help a person to decide to start a business. We will discuss the organizational forms of business, advantages and disadvantages of each, and possible tax consequences for each business structure. Some of the more common basic forms of business organizations are a sole proprietorship, partnership and corporation. A sole proprietorship is the least expensive business to start. “To start a sole proprietorship, all you have to do is to obtain a business license required by the local and state governments” (Parrion, Kidwell, & Bates, 2012). A limited partnership can be more costly to form because an attorney will need to be hired to write and uphold the partnership contract. The partnership agreement identifies the type of the association among the partners. “If a corporation is what you would like to start an attorney will need to be hired to write up documents to spell out things like how many stocks can be distributed, what voting rights the shareholders will have, and who the...
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...Business Structure Advice FIN/571 April 11, 2015 Dear John Owner, Congratulations on your decision to start a business. It is definitely a smart idea to be aware and analyze the different business structures, their tax implications, and where the investments come from. You do have several options to choose from, and each of them have both advantages and disadvantages. Some of your options include several types of corporations, partnerships, and sole-proprietorship. The first possible business structure is one of the types of corporations. The General Corporation is the most common type of corporate structure. The characteristics of a general corporations include being a separate legal entity, owned by stockholders (an unlimited number), that are protected from business creditors. One option is a type S Corporation, which is actually a type of General Corporation that has a special IRS tax status. It is popular with small businesses because they are charged as if they are sole proprietors, as well as combining tax advantages of a sole proprietorship with that of a corporation. Depending on the type of business you plan on starting, this may be an option for you. An advantage of the corporation is that the individual’s personal assets are protected. A disadvantage is that you have to share the profits with all of the stockholders. Another type of business structure that you could form is a Limited Liability Company, or LLC. There are fewer restrictions and...
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...Business Structure Advice Michael Haney University of Phoenix Foundations of Finance FIN/571 Alexandro Plascencia May 22, 2015 Dear Consultant, I am currently starting a business and developing my business plan. I'm in need of some advice on how to start forming my business. I am not sure exactly how financing occurs and whether or not I want to take on partners. I am interested and willing to learn the intricacies of my options to determine how to proceed best with my plan. Please provide advice on my options, the advantages and disadvantages of each, and possible tax consequences for each scenario? Dear Mr. Owner, I appreciate the opportunity for your inquiry regarding my advice about you developing and implementing a business program. I am providing you with advice concerning various business structure possibilities, advantages and disadvantages for each business system, and other tax implications regarding each business structure. Sole Proprietorship Structure: (Option 1). Your email suggested your unfamiliarity with operating a business or owning a business. This system provides you with the freedom to operate a flexible operation. Some of the advantages include: -Controlling the decision-making process for your business. -Transferring or selling the company at your discretion. -Sole proprietorships face no corporate taxes. -Operation costs remain minimal during the business development process. Sole Proprietorships are not isolated entities...
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...Business Structure Advice Rebecca Hardy FIN/571 - Corporate Finance 22 September, 2014 Professor Gurpreet Atwal Dear John Owner, Thank you for allowing my consulting firm to give you the information that you will need to make a sound decision as to the type of business structure that will meet your needs. The three main types of business structure are sole proprietorship, partnership, and corporation. In the next few sections I will explain each type and describe the advantages, disadvantages and tax implications that you would encounter if you selected that type. Let’s begin with the sole proprietorship. Sole Proprietorship The sole proprietorship is the easiest and most cost effective type of business structure to set up, so if funding is a concerned this business structure may be the best route to take. The only cost associated with starting a sole proprietorship the cost of obtaining a business license and the normal startup expenses. With the sole proprietorship the owner is only taxed once on the business’s income. However, one of the major disadvantages of the sole proprietorship is the unlimited personal liability that the sole proprietor faces. In the event that the business cannot generate enough cash flow to pay all of its financial obligations the owner becomes personally liable for all debts. This means that creditors can file lawsuits against the owner’s personal property as well as the business in order to seek repayment for services, loans...
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...Business Structure Advice Fin/571 September 21, 2015 William Stokes Business Structure Advice From: Hope Meeks Date: September 21, 2015 Subject: Business Structure Advice Dear John Owner, I am delighted to have the opportunity to provide you with information about the options available to you for starting a new business. I will begin with providing information on each structure along with the advantages and disadvantages of each type of business structure: the corporation, limited liability company (LLC), limited liability partnership (LLP), partnership, and sole proprietorship. The following will also explain the potential tax consequences of each structure. Corporation The third choice is a corporation; the creation of a corporation provides two structures, “C” corporation and an “S” corporation. They are similar structures, but have a few differences. The “S” corporation has restrictions on who the investors are and their number. In addition, they have differences in taxation, and both are the most difficult and expensive structures to form. Corporations have many investors, which take control of the company out of the hands of the owner; this provides extra opportunities for conflicts in decision-making. However, this type of structure has the advantages of limitless funding available from stockholders, and you will only have liability that is limited to your investment. LLC & LLP With a LLC, the number of partners is unlimited and you could...
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...Business Structure Advice Leroy Washington FIN 571 February 22, 2016 University of Phoenix Instructor – Hillman Lo The purpose of this paper is to provide prospective business owner, John Owner, with as much information as possible in his quest to start a new business. This paper is being written in response to Mr. John Owner’s email as shown below: Dear Consultant, I am currently starting a business and developing my business plan. I am in need of some advice on how to start forming my business. I am uncertain exactly how it will be financed and whether or not I want to take on partners. I am interested and willing to learn the intricacies of my options to determine how to best proceed with my plan. Please advise me regarding what my options are, the advantages and disadvantages of each option, and possible tax consequences for each scenario? Respectfully, John Owner Elements of a Business Plan 1. Executive Summary. The Executive Summary provides a succinct synopsis of the business plan, and highlights the key points raised within. The Executive Summary must communicate to the prospective investor the size and scope of the market opportunity, the venture's business and profitability model, and how the resources/skills/strategic positioning of the Company's management team make it uniquely qualified to execute the plan. The Executive Summary must be compelling, easy-to-read, and no longer than 2-4 pages. 2. Company Analysis. This section provides...
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...Business Structure Advice To: John Owner From: Brittany Rice Date: April 21, 2014 Subject: Business Structure Thank you for contacting me. There are many different business structures to choose from, but only one would fit what you are looking for. The different business structures to choose from are limited liability company structure, sole proprietorship, partnerships, and corporation structures. Each one of these is different from each other and has their advantages and disadvantages, and there are also many different tax consequences for each one as well. A limited liability company structure is a great way to go if you have the monies upfront to form it and for the startup costs. This type of structure covers the owners from company debt to where their personal belongings would not be touched, but in the beginning it is very expensive to start up. So if you don’t have enough money to put in from your pocket this may not be a very good idea. For the tax consequences the profits will go through the owners, but not be taxed double for it. The owner here will also be able to participate in the company. A sole proprietorship is very easy to start up and they are not as regulated laws to follow as other structures are. You would also have complete control over the company and what happens. The negative part of this structure is the banks are very hesitant to lend money to start the company and then if something happens personal property can be sought after...
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...Business Structure Advice Dear John, Thanks for choosing me for your consultation, regarding starting a business. Basically, you have six main choices to select from, which they carry different legal and tax implications. The following are what you need to consider: Sole Proprietorship It is the most common and simplest structure of business you may choose to initiate a business. Unincorporated business owned and operated by you, from which you will be entitled to all profits and in charge of the business liabilities, debts, and losses. The business is not taxed separately between you and your business income, both are considered the same under this structure. It is inexpensive and easy to establish and complete control and decisions originate from you, without required consultation from a third party. However, it is hard to raise funds. Limited Liability Company LLC is a hybrid kind of legal structure which offers limited liability features of a corporation and tax efficiencies as well as flexibilities of operations of partnership. LLC you and your partner are not taxed separately, instead, the losses and profits are passed through the business to each owner, the owners then report the income on their individual federal tax returns. You, as well as your partner, experience limited liability over the decisions and actions of the business. If the business incurs a lawsuit or debt, your individual assets will be exempt. Furthermore, you will receive %50 of the profits...
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...Business Structure Advice FIN/570 Arnold Harvey Victoria Holmes 4/20/15 Dear John Owner, thank you for contacting me about wanting to start up your business. Here is what you will first need to know. Step one is identifying which business structure you plan on setting up. The choices are sole proprietorship, partnership, LLP (limited liability partnership) and corporation. Since you asked to be informed of each before making a decision, I will give you a small break down and its tax advantages and disadvantages. Sole proprietorship is a company owned by you or the person planning to start the business. The major pro is that you will be your own boss. The major con is that you as the owner are responsible for everything. Tax wise, the taxes are claimed on your individual taxes. The good thing here is there may be a tax break for your first start up. The bad is that it will be included in your income and if you did not pay enough taxes, then you will end up owing the IRS money. Only decide this option if you are sure you want to only work for and by yourself. Partnerships are ideal if you are looking to split the company down the middle. It is easier on you because you can share the responsibilities of the company. You can decide to form and LLP, which gives a partner limited liability if anything should go wrong within the company. The tax situation is still the same as a sole proprietorship. Each partner must file for the company on their personal taxes. Corporations...
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...Starting a business exciting and also it is incredibly challenging. There are things that you need to think and do before starting your business. Having a business plan can help your business to be successful. On your business plan you need to put your executive summary of your business. On the executive summary you need to include the mission statement, company information, growth highlights, the product or service that you will offer, financial information and summarize future plan. Since you are just starting a business you can focus on your background and experience and it will also be helpful to put the reason why you decided to open up a business. Include your market analysis, target market and how and why your particular solution can fill. When you are writing your business plan you need to convince reader that you will be successful in your target market and you also need to address the business future plan. When choosing your business structure you need to consider the legal and tax implications. There are different kinds of business structure and those are the following: * Sole Proprietorship – the most basic type of business. Easy and simple to start, the costs are minimal. You alone own the company and will be responsible for the assets and liabilities. The business will not be taxed separately. When filling for tax you will need the form 1040 schedule C. The disadvantage of sole proprietorship is that it has unlimited personal liability, heavy burden because you...
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...Business Structure Advice FIN/571 October 20, 2014 Richard Vermeer Business Structure Advice The purpose of this paper is to respond to an email from John Owner who is seeking advice on his options regarding all the possible types of business entities that there are for him to choose from to form his new business. In addition, Mr. Owner would like to know the advantages and disadvantages of each entity and the tax consequences connected with each entity. The business structures that will be discussed with Mr. Owner will include sole proprietorship, partnerships which include general partnerships and limited liability partnerships and corporations which include subchapter or S corporations and limited liability corporations. Sole Proprietorship A sole proprietorship is the simplest structure and the most inexpensive business to start. The owner has complete control over the business and has the sole rights to the business profits. The owner is responsible for making all business decisions and does not have to defer to partners for decision approvals (Parrino, Kidwell, & Bates, 2012). The life entity of a sole proprietorship is limited (Parrino et al, 2012, p. 572). An advantage of a sole proprietorship is that the profits earned are subjected to lower income taxes (Parrino et al, 2012 p. 572). One of the major disadvantages of a sole proprietorship is that the owner is liable for all business debts. The issue with unlimited liability is that creditors review...
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...Business Structure Advice Dear John Owner, Starting a business is a very big decision and will be one of the most challenging adventures that you will participate in. You emailed me asking for my advice concerning business structures and how to proceed given your newly devised business plan. I have attached a table that I created that gives you the information you are looking for. The table contains the business structures that are most common, a brief overview of the structures, advantages, disadvantages, and possible tax implications of each business structure. I have put this information in table form with bullet points so that it is easy to understand. I believe that the information that I have given you will better help you make that important decision regarding the business structure of your company. Please look over the information below and consider all of your options carefully. There is no right or wrong answer when it comes to choosing a business structure. The right structure is the one that works best with your business plan and needs. If you have any questions regarding the information, please feel free to contact me anytime. Respectfully, Nichole Coates, Consultant Business Structure Type Overview of Structure Advantages Disadvantages Tax Consequence of Business Structure Sole Proprietorship • 75% of businesses make up this type of structure • One owner and small number of employees • Simple to start • Least regulated • Owner...
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