... Joint Venture Joint Venture acts like a general partnership, but is clearly for a limited period or a single project. If the partners in a joint venture repeat the activity, they will be recognized as an ongoing partnership and will have to file as such, and distribute accumulated partnership assets upon dissolution of the entity. Advantages of a Partnership Partnerships are easy and inexpensive to establish. With more than one owner, there would be no difficulties in raising fund. Shared responsibility. The tax consequences are less as your profits are recorded directly onto your personal income tax return (no double taxation). Potential employees may be attracted to the business if given the incentive to become a partner. The business usually will benefit from partners who have complementary skills. Disadvantages of a Partnership General partners have unlimited liability. Partners are jointly and individually liable for the actions of the other partners. Profits must be shared with others. Since decisions are shared, disagreements can occur. Some employee benefits are not deductible from business income on tax returns. The partnership may end upon the withdrawal or death of a partner. Corporations A corporation is different from a sole proprietorship or a partnership in that a corporation is separate statutorily created legal entity from the people who manage, own, control, and operate it. A corporation can be taxed; it can be sued; it can enter into contractual...
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...Partnerships vs. Corporations Tracy Kamke Professor Edward Hastings ACC317 March 9, 2014 A partnership is an association owned by two or more people to carry a business or trade with each parnter contributing money, property, labor, or skill and all partners expecting to share the profits and losses. A corporation is a separate entity that has its own rights, privileges, and liabilities separate from its members. Whether you choose to be a partnership or corporation, depends on how much your federal income tax will be. There are different types of corporations and many different partnership types. There are two different types of corporations. You have the C Corporation, which has the toughest tax bracket; you are subject to double taxation. The first tax is on the company's net earnings, and the second tax is that each shareholder must pay tax on his or her dividend. A C Corporation can reduce or eliminate its federal income tax liability by distributing its income to the shareholders who perform services for the company (Battersby, 2008, p.10). The other is the S Corporation which resembles the partnership and report entities like partnerships. Partnerships are not taxable entities and are not subjected to federal income tax. In a partnership, you are required to file a Form 1065 to report the results of the partnership's business activities. There is a general partnership which is two or more partners that participate in management of...
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...Legal Forms of Business Legal Forms of Business Entrepreneurs face a difficult decision in choosing a legal form of business. The preferred form of entity is dependent on many relative factors, such as the type of organization and business environment. Different forms of legal businesses have different tax, investment, and financial implications. The best-suited business calls for a thorough analysis of pertinent facts before making a decision – requiring some careful planning and strategy. This study provides an analysis of seven forms of legal business. Sole Proprietorship Sole proprietorships are fairly simple and inexpensive to create and operate. Legally, a sole proprietorship is inseparable from its owner, and therefore the owner is personally liable for business debts (Cheeseman, 2010). The tax implications for a sole proprietorship are simple. The business owner reports profits and losses on their personal tax returns. Sole Proprietorship is the preferred form of business in establishing or operating a small business where personal liability is not a big concern. Sole proprietors own businesses in many industries. Some of the more common sole proprietorships are landscaping services, housecleaning services, independent writing services, and tutoring services. * Landscapers tend to work alone or hire a small team of employees, providing landscaping services to homeowners and businesses. Sole proprietor may take on independent contracts and projects...
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...sole proprietorship, all control of business decisions rests with the owner. • PROFIT RETENTION – All profits generated from a sole proprietorship are income for to the business owner after all the business debts and obligations are satisfied. • LOCATION – There are no legal requirements to start a sole proprietorship on a federal level however each state has different requirements for filing for licenses and permits. • CONVENIENCE/BURDEN – The convenience of having a sole proprietorship is that the owner has full control of the business in every way. The main problem with sole proprietorships is that they are difficult to get funding for which increases the difficulty of starting a business. GENERAL PARTNERSHIP: • LIABILITY – As each of the business partners is jointly and severally liable for any and all business debts and liabilities. Their personal assets can be used to satisfy business debts regardless of knowledge of wrongdoing or malpractice. • INCOME TAXES – Each...
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... The most common forms of business are the sole proprietorship, partnership, corporation, and S corporation. A Limited Liability Company (LLC) is a relatively new business structure allowed by state statute. A sole proprietor is someone who owns an unincorporated business by himself or herself. However, if you are the sole member of a domestic limited liability company (LLC), you are not a sole proprietor if you elect to treat the LLC as a corporation. A partnership is the relationship existing between two or more persons who join to carry on a trade or business. Each person contributes money, property, labor or skill, and expects to share in the profits and losses of the business ("Irs", 2014). A partnership must file an annual information return to report the income, deductions, gains, losses, etc., from its operations, but it does not pay income tax. Instead, it "passes through" any profits or losses to its partners. Each partner includes his or her share of the partnership's income or loss on his or her tax return ("Irs", 2014). In forming a corporation, prospective shareholders exchange money, property, or both, for the corporation's capital stock. A corporation generally takes the same deductions as a sole proprietorship to figure its taxable income. A corporation can also take special deductions. For federal income tax purposes, a C corporation is recognized as a separate taxpaying entity. A corporation conducts business, realizes net income or loss, pays...
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...the federal or state government, because this is one of the main reasons of taxation. Depending on what you chose for your business, your entity selection can change from a sole proprietorship to corporation within several years, it all depends on how well the business has progressed. For individuals who wish to start their own business, they should seek legal advice to determine which entity will suit their business needs. Sole Proprietorship This is a business that is owned by one person, it is simple because one single person runs the business. Normally, this type of entity are for service related such as doctors and accountants, but sometimes people who make small dolls or services such as yard detail. The type of business, the owner keeps are the profits, you need only a small percentage of money to start up and not complex to setup are some of the advantages. The disadvantages is the business debts can be recovered from the owner’s assets, it is very difficult to transfer because the owner has to sale the whole business and constraints on growing the business because of the limited resources of the owner. Sole Proprietorship businesses: doctor’s office, account services (tax season), photographer and mobile food truck vendors. Partnership/Limited Liability Partnership (LLP) Two or more people go into business together, with a mutual understanding of sharing the profits. Somewhat like the sole proprietorship entity, with two classifications:...
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...also means that the owner is taxed; the business is not taxed separately. Although one of the up sides to this type of business structure is that the business is run completely the way the owner wants to run it, they only have to answer to government and state regulations. Another upside is that it is the cheapest business structure to form. Partnerships A partnership is when two or more people come together to own a business. This type of business is also unincorporated which again means that the owners are at total liability. The taxation for the business is also done through the owners; each owner includes their share of the business’ gains or losses in their tax returns. Having partners has its pros as there are more people to share in the liability and more people to help make the big decisions with. Partners also bring a balance in ideas, help the group see the pros and cons of each decision to be made. Corporations A corporation is formed by gaining shareholders in order to gain the corporations capital stock. A C corporation is treated as a separate entity when it comes to taxation. As this separate entity the corporation it takes the same deductions tax wise as a sole proprietorship, as well as some other special...
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...responsibilities with anyone else. Profit retention - as a sole proprietor, any profit made from the business would only be distributed to the sole owner. There are not partners associated with sole proprietorship. Expansion - as a sole proprietor, you have autonomy or flexibility with your business. Since sole proprietors are not seen as legally separated from their business, the ease of expansion is uncomplicated. Compliance - there are minimal reports you have to file with the government and there is no restrictions on the operations of your business. General Partnerships: is a partnership that is formed with two or more people establishing a business to make a profit. Liability - since each partner is considered a general partner, each can be held personally liable for the partnership’s actions and debt. For example, if the business gets sued, the partners will be sued as a group. Income Taxes - with general partnerships each partner has to pay a percentage of taxes based on income percentage. This is...
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...Forms of Business Ownership There are basically four ways to organize a business. • Sole Proprietorship • Partnership • Corporation 1.Sole Proprietorship A sole proprietorship, also known as the sole trader or simply a proprietorship, is a type of business entity that is owned and run by one individual and in which there is no legal distinction between the owner and the business. The sole proprietor form of business ownership is the most common form in the United States and also the simplest. In this form of business ownership, an individual proprietor owns the business, manages the business, and is responsible for all of the business' transactions and financial liabilities. This means that any debts incurred must be paid by the owner. Advantages of Sole Proprietorship Quicker Tax Preparation: As a sole proprietor, filing your taxes is generally easier than a corporation. Simply file an individual income tax return (IRS Form 1040), including your business losses and profits. Your individual and business income are considered the same and self-employed tax implications will apply. Lower Start-up Costs: Limited capital is a reality for many start-ups and small businesses. The costs of setting up and operating a corporation involves higher set-up fees and special forms. It's also not uncommon for a lawyer to be involved in forming a corporation. Ease of Money Handling: Handling money for the business is easier than other legal business structures. No payroll set-up is required...
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...income. The business owner can reduce some of the taxable income by writing it off as a business expense. • LONGEVITY – Without adequate planning the business could cease to exist with the death of the business owner. There must be extensive legal and financial planning for a business to survive in the event of the owner’s death. • MANAGEMENT – The owner has full control over all decisions regarding any operation of the business. • PROFIT DISTRIBUTION – All of the profits belong to the owner, there are not any partners or shareholders that the profits have to be split amongst. • LOCATION – The business can be located at any legal location of the owners choosing or be moved as the owner deems necessary. GENERAL PARTNERSHIP: A general partnership is best...
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...are seven major forms of business: sole proprietorship (sole trader), partnership, limited liability partnership (LLP), and limited liability company (LLC), subsidiary or subchapter corporation (S), franchise, and corporate/company (C- traditional). The various forms of businesses are established and recognized by state laws. To determine the type of business form to use, it is important to know the differences, advantages, and disadvantages. Sole trader/proprietor is the clearest and simplest form of business to establish. It is just one owner, debt/tax liabilities fall on the owner, the income (profits/losses) reports on personal tax return. Examples of sole proprietorship are franchise, self employment, and independent contractor. Advantages are total autonomy of the business, no legal procedure to setup, no set hours/wages, and no shareholders. Disadvantages are if owner dies the business dissolves, full responsibility of tax/debt liabilities, difficulty obtaining long-term financing, and personal liability if sued. General partnership is more than one owner, involving verbal or oral agreement but not filing paperwork to create a specific entity, such as a corporation or LLC, either partner can bind the business to a contract, sharing of income (profits/losses), tax/debt liabilities, and legal actions. Each partner reports income (profits/losses) on personal tax return. Instances of a general partnership are a law firm, dental/medical office, and brokerage firm. A person...
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...Form Department of the Treasury Internal Revenue Service A Principal business activity B Principal product or service 1065 U.S. Return of Partnership Income For calendar year 2011, or tax year beginning ▶ OMB No. 1545-0099 , 20 . , 2011, ending See separate instructions. 2011 35-4545454 01-15-2008 Name of partnership D Employer identification number ZLW GP C Business code number Print or type. Number, street, and room or suite no. If a P.O. box, see the instructions. City or town, state, and ZIP code E Date business started Miami, FL 33146 F Total assets (see the instructions) $ 3301467 Amended return G H I J (1) (2) (3) Initial return Final return Name change (4) Address change (6) Technical termination - also check (1) or (2) Other (specify) ▶ Check accounting method: (1) Cash (2) Accrual (3) Number of Schedules K-1. Attach one for each person who was a partner at any time during the tax year ▶ 2 Check applicable boxes: Check if Schedules C and M-3 are attached . . . . . . . . . . . . . . . . . . . . . . (5) . . . . . . Caution. Include only trade or business income and expenses on lines 1a through 22 below. See the instructions for more information. Merchant card and third-party payments (including amounts 1a reported on Form(s) 1099-K). For 2011, enter -0- . . . . 4173585 b Gross receipts or sales not reported on line 1a (see instructions) 1b 4173585 c Total. Add lines 1a and 1b . . . . ...
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...Legal Forms of Business Consider each of the following forms of business: sole proprietorship, partnership, limited liability partnership, limited liability company, S corporation, franchise, and corporate form. Develop scenarios in which each of these forms of business would be the preferred form. For each scenario, justify why the corresponding business form is preferred. In today business world entrepreneurs are presented with many forms of business organization to choose from to conduct their business. Every form of business brings advantage as well as disadvantage and the selection of the legal form of the business organization available should base on according to Cheeseman (2010), “factors, including the ease and cost of the formation, the capital requirements of the business, the flexibility of management decisions, government restrictions, personal liability, tax consideration, and the like.” (Cheeseman, 2010). Sole proprietorship, partnership, limited liability partnership, limited liability company, S corporation, franchise, and corporate are the most known entrepreneurial forms of conducting nosiness. Below are you will find scenarios in which each of these forms of business would be the preferred form and justification why the corresponding business form is preferred. Sole Proprietorship Sole proprietorship represents the simplest form of the legal business organization where the owner, called in this form of business organization the sole proprietor, is...
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...Form Department of the Treasury Internal Revenue Service A Principal business activity 1065 U.S. Return of Partnership Income For calendar year 2013, or tax year beginning ▶ OMB No. 1545-0099 , 20 . , 2013, ending Information about Form 1065 and its separate instructions is at www.irs.gov/form1065. Name of partnership 2013 12-3456789 D Employer identification number Manufacturing B Principal product or service Walk Upright Company Type or Print Number, street, and room or suite no. If a P.O. box, see the instructions. E Date business started Walking Poles C Business code number 58 Trekkers Point City or town, state or province, country, and ZIP or foreign postal code F Total assets (see the instructions) $ 339900 G H I J Check applicable boxes: Fort Collins, CO 80521 599,999 Amended return (1) (2) (3) Initial return Final return Name change (4) Address change (6) Technical termination - also check (1) or (2) Other (specify) ▶ Check accounting method: (1) Cash (2) Accrual (3) Number of Schedules K-1. Attach one for each person who was a partner at any time during the tax year ▶ 2 Check if Schedules C and M-3 are attached . . . . . . . . . . . . . . . . . . . . . . (5) . . . . . . Caution. Include only trade or business income and expenses on lines 1a through 22 below. See the instructions for more information. 1a b c 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16a b 17 18 19 20 21 22 1a Gross receipts...
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...EXERCISES 1. Corporation: A corporation, as used in income taxation, includes partnerships, no matter how created or organized, joint stock companies, joint accounts (cuentas en participacion), and associations or insurance companies. 2. 3 Associations that are not within the meaning of the term “corporation” Corporation does not include: 1. a general professional partnership; and 2. a joint venture or consortium formed for the purpose of undertaking construction projects or engaging in petroleum, coal, geothermal and other energy operations pursuant to an operating or consortium agreement under a service contract with the government. 3. A. Domestic Corporation Generally, corporations in the Philippines are required to pay income tax of 32 percent of taxable income from sources both within and outside of the Philippines. However, the president may, with the recommendation of the secretary of finance, give corporations the option to pay a tax of 15 percent on gross income. Corporations that choose this option may not switch back for three years. B. Resident (Foreign) Corporation A resident foreign corporation is one organized, authorized, or existing under the laws of any foreign country, engaged in trade or business within the Philippines. C. Non-Resident Corporation The term applies to a foreign corporation not engaged in trade of business in the Philippines. 4. 3 Categories of income subject to tax of the Domestic Corporation. How are they...
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