Business Entities Advantage And Disadvantages - 2117 Words

Business Entities: Advantage and Disadvantages Dwayne M. Morris BUSN 370: Business Law Regent University Clement Abrams April 17, 2016 Abstract The four legal business entities are reviewed and compared to outline the advantages and disadvantages of each type for business owners. The Sole Proprietorship, Partnership, Limited Liability Company, and Corporation will all be outlined. Furthermore, details regarding ownership structures, options for raising capital, taxation, and the impact an owner’s role in day to day operations and management can have in establishing individual liability limits are factors that are addressed. This eventually results in finding that the Limited Liability Company (LLC) appears to provide the†¦show more content†¦(Johnson, 2015, p 161). In addition, all business profits and losses are reported on the owner’s personal tax return and are taxed at the owner’s effective tax rate. The business entity, itself, is not taxed separately. Given, that there are no formal requirements to establish this entity, a business license, an idea, sufficient startup funds and the desire to be a business owner are effectively all that are needed to become operational. This is no doubt why 70 percent of U.S. businesses are owned and operated by sole proprietors (Beesley). However, despite their large numbers, ease of formation and the entity not being taxed, sole proprietorships have the disadvantage of its owner having unlimited liability for business losses. While the Sole proprietor owns all the assets, he/she also owes all business liabilities in their entirety (Chow, 1942, p.157). This means that the owner’s personal assets can be used to satisfy business liabilities. However, business owners do have the option of purchasing a liability or umbrella insurance policy to offset or potentially eliminate the need to use personal assets to cover business losses. This liability insurance should include worker’s compensation, auto, general liability, and property and casualty coverage. Insurance costs will vary from business to businessShow MoreRelatedChoosing the Right Business Entity1130 Words   |  5 PagesChoosing the Right Business Entity By Rosa Martinez Professor Smith English 315 February 24, 2012 TRANSMITTAL TO: Small Business Owners FROM: Rosa Martinez DATE: February 24, 2012 ------------------------------------------------- SUBJECT: Choosing the Right Business Entity ------------------------------------------------- Enclosed is the Justification Report covering information related to different types of entities that could be chosen to establish a business. Furthermore, theRead MoreEmployment Law Compliance Plan1327 Words   |  6 Pagesï » ¿University of Phoenix Material Business Forms Worksheet There are seven forms of business: sole proprietorship, partnership, limited liability partnership, limited liability company (including the single member LLC), S Corporation, Franchise, and Corporation. 1. Research and provide three advantages and three disadvantages for each business form. 2. Provide a 100- to 200-word summary in which you provide an example business that you would start for each form. What is legally necessaryRead MoreBenefits Of Using Object Oriented Database1352 Words   |  6 Pagesto multiple records. network models look like a tree that isn t the right way up where the owner is the bottom of the tree and the member information being linked to the owner is the branches. This model is flexible due to the multiple links. Advantages It can be easily accessed in any table record in the database as it has many to many relationships. It is flexible so it is easier to navigate and search for information. ImageDisadvantages If you are a first time user it can be difficult toRead MoreBenefits And Benefits Of Joint Partnership952 Words   |  4 Pagesgo into business together. They have decided that a general partnership is right for them. There are many advantages to general partnership, and I agree that a partnership could be a great idea for these three accomplished individuals. A partnership would allow them to bring together their talents and resources to start for profit business. A partnership would also allow them to start a business without the formal structure of a corporation. With these advantages come some disadvantages as wellRead MoreSample Resume : Selecting Partnership Formation1311 Words   |  6 Pagesopportunity to clarify the answer for you. I constructed the memo into introduction of partnership, different types of partnerships, advantages and disadvantages of different partnerships, federal case studies, and recommendation. Introduction of Partnership: According to Internal Revenue Code, a partnership is an association formed by two or more persons to carry on a trade or business, with each contributing money, property, labor, or skill, and with all expecting to share in profits and losses (1). A â€Å"person†Read MoreCurrent Liabilities And Long Term Liabilities1075 Words   |  5 Pagesand executives of the company. Examples of current liabilities are: Buying a gift card from Amazon because when customers purchase an Amazon gift card the company is expected to offer items in exchange for the gift card. Another example is when a business collects insurance money from an employee. The insurance premium is deducted from the employee’s salary and then the employer reports it as liabilities. Another example is I ordered a subscription of sports magazine for one year. First I had toRead MoreClient Development On Their Company1119 Words   |  5 Pagesmajor retail stores. This only brings big and better ideas to an individual owner of a company. While the client was involved in the sole proprietorship, there were different characteristics of the business that the expansion was required to be utilized, but there were still issues within the business. The client has informed me that they have recently encountered a problem with their distributor. At the point when the item landed in the merchant s area, the wholesaler rejected the item, sayingRead MoreLimited Liability Company ( Llc )1480 Words   |  6 Pagesan LLC your personal assets are protected from lawsuits and business debt, and only assets of your company can be touched by lawsuits and creditors† (Small Business – Chron.com, 2015). With a LLC you have plenty of advantages to include the benefit of al ways upgrading to another business organization and having the security and peace of mind of limited liability. It is also easier to form than a corporation. There are also disadvantages to include self-employment taxes. â€Å"Unless you choose to be taxedRead MoreTypes of Business Ownership1072 Words   |  5 PagesThe sole proprietorship is the simplest form of business organization. A sole proprietorship is a business that is owned by an individual who is solely responsible for all aspects of the business. The owner is personally responsible for all debts of the business, even in excess of the amount invested. The business and its owner are thus considered the same entity. The advantages of a sole proprietorship include: a. Low start up costs, as legal and filing fees are at a minimum. However, manyRead MoreBenefits Of A Partnership Is The Trust Factor1604 Words   |  7 Pagesas a separate entity. That being said, each partner can deduct the losses of the business from their own personal taxes if it is a general partnership. This could be an option for the four brothers and their cousin, Xavier. This would make sure that the business is only run by the family and it gives everyone an equal say in the decision making of the farm. It also would help that the farm would be taxed only as personal income for each of them. Disadvantages The major disadvantage to a partnership