sample
Haven't found the Essay You Want?
GET YOUR CUSTOM ESSAY SAMPLE
For Only $12.90/page

Sole Proprietorship: A sole proprietorship is owned by only one person Essay

All profits and losses are the responsibility of the owner only. Liability – There is unlimited liability in a sole proprietorship. The owner is solely responsible for any debts that may occur. Income Taxes – The business files taxes as one single unit. Because profits are not shared, they are considered personal income to the sole proprietor. Longevity/Continuity – In a sole proprietorship if the owner dies or quits, the business dies as well. The only exception would be if the owner states in his or her will that the business can continue. Control – The owner has complete control in a sole proprietorship. Profit Retention – The owner retains all profits.

Convenience/Burden – The owner can start doing business as soon as they like. If the owner wishes to operate under a fictitious name a D.B.A (Doing Business As) will need to be filed. Some forms of business my require permits or licenses. General Partnership: A business owned and operated by two or more people that share gains and losses. Liability – There is unlimited liability in a general partnership. The owners/partners are responsible for all profits and losses. If one partner is unable to pay a debt the other partners will be accountable to pay. Income Taxes – Taxed the same as a sole proprietorship. Each partner reports their earnings on their own personal income tax filing. The partnership itself is not taxed separately. Longevity/Continuity – The partnership dissolves if one of the partners dies or decides to quit for any reason. If there is a buy/sell agreement in place the remaining partners may purchase that partners shares from him/her or their heirs. Control – All partners have equal control of the business unless otherwise stated in the articles of partnership. Profit Retention – All profits are divided equally between the partners unless otherwise stated in an agreement. Convenience/Burden – Partnerships can be created with an oral or written agreement. The agreement is called the articles of partnership which maps out how the partnership will be ran. Limited Partnership: Contains limited and general partners. Limited partners are not allowed to manage any part of the business and they possess
limited liability. Liability – Limited partners have limited liability and are only accountable for the amount they have invested into the business. The general partners have unlimited liability. Income taxes – If the limited partnership begins to take on characteristics of a corporation then it could be taxed as such. General partners are able to write off business expenses but limited partners cannot. Longevity/Continuity – If a general partner dies so does the business unless the agreement between partners says different. If a limited partner dies the partnership will continue. The executor of the estate would receive the entitled portion of profits and assets in order to settle the estate. Control – General partners control the business while limited partners act as investors. Limited partners must refrain from making any management decisions. Profit Retention – Limited partners receive an agreed upon amount of the profits that is determined in the partnership agreement. The general partners divide all profits. Convenience/Burden – The partnership agreement will explain the ins and outs of the partnership. C Corporation: Also known as closely held corporations. They are considered a legal entity that is separate from the owners. They can have an unlimited amount of shareholders. Liability – Stockholders are only liable for the amount of their investment. The corporation itself is liable for any debts incurred and is responsible for actions of the employees. Income Taxes – Because corporations are a separate legal entity they are subject to federal, state, and local taxes. Shareholders are taxed on the dividends they receive from the corporation. Since the money comes from the same place this is known as double taxation. Longevity/Continuity – A corporation can last forever or be created with a predetermined life span. If an owner or shareholder dies the corporation will continue to be operational. Control – Stockholders usually have multiple roles within the corporation. They can act as directors, officers, and employees. C corporations typically have a president, vice president, secretary, and a treasurer. Profit Retention – Profits are distributed in the form of dividends to the stockholders. Owners are able to set their salaries at any amount they choose. Convenience/Burden – Owners seek incorporation in the state that the majority of business activities will take place. The founders have to file the articles of incorporation with the state and declare if they are for-profit or nonprofit. They also have to declare
their identity and how long the company is intended to exist. Then they have to set how many shares will be issued at start up. S-Corporation: S corporations are similar to partnerships in that they are not subject to double taxation. Taxation passes through to the shareholders. S corporations are limited to no more than 100 shareholders. Liability – Shareholders have limited liability and are only responsible for the amount of their investment. Income Taxes – The Corporation itself is not taxed. Taxation passes through to the shareholders only. There is no double taxation for an S corporation. Longevity/Continuity – S corporations can go on endlessly even if one of the owners dies or withdraws from the corporation for any reason. Control – The board of directors has control and elects officers to manage the corporation. Profit Retention – Profit retention is the same as a C corporation. Profits are distributed in the form of dividends to the stockholders. Owners are able to set their salaries at any amount they choose. Shareholders can trade shares as they wish without any limitations. Convenience/Burden – S corporations must not have more than 100 shareholders. Shareholders can vote to revoke the S corporation status if they choose, but this requires the vote of a shareholder owning more than 50 percent or more of voting stock. S status may be terminated if there are more than 100 shareholders. Limited Liability Company (LLC): LLCs do not have a limit on the amount of owners. LLCs combine the characteristics of partnerships and corporations. Owners of an LLC are referred to as members. Liability – Members have limited liability and are only liable for the amount of their investment in the business. Income Taxes – LLCs can choose to be taxed as a corporation, sole proprietorship, or a partnership. They have the opportunity to choose how they will be taxed on a year to year basis. Longevity/Continuity – If one of the members dies, the remaining members can vote to keep the company going. State laws and the operating agreement may require a unanimous vote from the remaining members in order to continue the LLC. Control – Members are allowed to participate in management functions of the LLC. Profit Retention – Members share profits as they wish. Some members may receive larger amounts of profits than others. Convenience/Burden – There are no limits on the amount of members in a LLC. Articles of organization are filed with the Secretary of State in the state where the business is
chartered.

Part B

Memo
March 8, 2014

After reviewing all of your concerns I have determined that a Limited Liability Company (LLC) would be the best form of business to suit your needs. Doing business as a sole proprietor can be very time consuming and stressful. I believe making the change to an LLC will give you freedom to really run the business to your liking. As stated in the report LLCs combine the characteristics of partnerships and corporations. They are very easy to start up and can sometimes be formed without any legal assistance. An operating agreement will be designed to map out how the business will function and be managed. I would also recommend creating a buy/sell agreement in the event that you may become deceased or wish to withdraw from the business for any reason. Ownership cannot be transferred without approval from the other members. This will allow you to keep the business in the family by making them members with majority shares.

In a LLC all members possess limited liability and are only liable for the amount they have invested into the company. This is important because if any employees or subcontractors become injured on the job or if there is an installation/product malfunction you will not be held personally liable. The only thing that would be at risk would be the company assets.

LLCs give you the ability to have a lot of control over your business. You will determine how profits are shared and how the business is managed. This will also enable you to keep things in the family. You can also bring in other members to increase capital. The company itself will not be taxed but taxation will pass through to the members on their shares of income.

I strongly believe that changing your business to a LLC will put all of your worries at ease and allow you to have plenty of control of how the business
is ran. Please reach out and contact me if any questions arise.


Essay Topics:


Sorry, but copying text is forbidden on this website. If you need this or any other sample, we can send it to you via email. Please, specify your valid email address

We can't stand spam as much as you do No, thanks. I prefer suffering on my own