Question

This is just a discussion post from my classmate. I just need to respond. Based off of what is written, please answer with a simple analysis of what's written. (example: Interesting post, I see that...)

1. Discuss each of the following business entity types including ownership, financial and legal and tax issues related to each type.

Sole Proprietorship

A sole proprietorship is owned by only one person and the firm and the owner are considered one and the same from a legal standpoint. The upside of this is that all profits after taxes belong to the owner, but at the same time the owner must absorb all losses and debts that the company has. This proprietorship posts huge risks for the owner if he/she were to be sued, not only could the business assets be taken but the owner’s personal assets could also be absorbed in the lawsuit.

General Partnership

A general partnership is very similar to a sole proprietorship in the case that all profits go to the partners and the owners are responsible for all costs, the main difference is there are two owners instead of one. When fighting a legal battle both owners could lose their personal assets as a result of a loss. Benefits to a general partnership are the owner could take time off where they couldn’t in a sole proprietorship, since they have the other owner to fill in(n.d,2018). Costs are still low for a general partnership due to the fact that many partnerships are home based or two people are putting towards the cost.

Corporations (discuss C-Corp and S-Corp separately)        

   A corporation has many different owners through the way of selling shares to the company that are traded in public stock markets. The main different from corporations and other ownerships is the separation of ownership and management (n.d, 2018). In corporations owners/shareholders do not get direct benefits or risk of profits or losses. The value is determined by the stock market and the performance of the company. If the company is doing well the chances of a stockholder to sell their stocks are low , and if the company is doing bad or facing hardships its likely the stocks will be pulled out.         

                                                                                                                

                C-Corporation         

A C-corporation is where the shareholder and corporate profits are both taxed, this happens when cash dividends are given to the each shareholder.

                               

                S-Corporation

The S-Corporation avoids double taxation. This is done because the firm’s losses and profits are noted on the shareholders tax forms. There is a disadvantage of this thought, the shareholders are capped at a certain amount (100) where large corporations have thousands of shareholders so this corporation would not work for them.

Limited Liability Company
               

                The most popular type of corporation is the LLC, this allows partners or single owners to act as a corporation but they are not held personally responsible for the debts of the company. This is a great option for small businesses but it is not yet recognized federally. When paying taxes the company must select to be treated as a corporation, partnership or sole proprietorship.

Answer 1

Thought provoking post depending upon the type of ownership, liability, investment, seed capital and financial and legal issues, the law allows each citizen to decide what he or she wants as a structure of his or her firm.

the post simply describes that what all are the features and financial and legal implications of various types of structures,

Sole Proprietorship: these organizations are usually small , local, and are held by a single person wherein all the profits and risks involved in the business fell upon the proprietor as law considers both the proprietor and business to be the same advantage is that all profits are enjoyed by the proprietor and disadvantage is that in case of any legal loss the loss can be recovered from the proprietors personal assets.

General Partnership: more or less similar to the sole proprietorship , usually larger then it , investment involved is more but the legal issues remain the same now both partners enjoy the profits but at the same time are responsible in legal cases and losses can be recovered from their personal assets, however one partner can take a leave off in case of requirement.

Corporations:or Inc. in popular culture here the management is separate from the ownership meaning that the money is raised from public funding through the share market or stock market and the shareholders or owners (one with maximum number of shares) are not benefited from the corporations benefits but at the same time they are also not directly involved with a corporations risks and losses, the value of share fluctuates in the share markets.

these corporations are of two types: C-Corporation, where cash dividends are paid to each shareholder thereby both the corporation and the shareholders are taxed.

S-Corporation though does not have double taxation but the disadvantage is that , the shareholders are not taxed but the profits/ losses are noted on the shareholders tax forms , seems good but small shareholder does not benefit as there is normally a capping on the numbers of shares held by an individual, dose smaller shareholders are left out,.

Limited Liability Company: or LCC most popular structure in present times this allows small businesses having single owners or partners to act as a corporation , where they cannot be held personally responsible for the losses or debts of the company, however for taxation purpose the LCC must select the option be treated as , Corporation, partnership, or sole proprietorship, also disadvantage is that this type is not recognized federally i.e. throughout the US.

thus depending upon investment, size, location, seed capital, risks, taxation, control , lrgal issues and liability the various structures available for business in the US.