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Lit1

In: Business and Management

Submitted By victor27
Words 1357
Pages 6
PART A
Sole Proprietor ­ This is the most common type of business ownership. It only requires one person, who can work by themselves or contract work out but does not have partners. 

● Liability ­ The business owner and business are seen as one. Whatever profits the business makes, the business owner makes. Also, whatever debts the business takes on, the owner is responsible for.

● Income Taxes ­ Because there is no difference between the owner and business, all business profits must be claimed on the owner’s personal taxes.
● Longevity/Continuity ­ The business can continue as long as the owner is alive. This type of business cannot be passed on.
● 

Control ­ The owner has the total control over the business. They make their own decisions. ● Profit Retention ­ Whatever the owner makes from the business is theirs to keep, however they usually will put some of the money back into the business.
● 

Location ­ No forms are necessary. Wherever the business owner sees fit, the business can move without issue.
● Convenience/Burden ­ The easiest business to start on your own however the owner is fully liable for anything that happens with the business.
 General Partnership ­ Two or more unincorporated people form a business and still have liability, as with a sole proprietorship. The benefit is that there are two (or more) people to share responsibility. ● Liability ­ Business owners and the business are still seen as one, same as in the sole proprietorship. Now the liability falls on two or more individuals.
● 

Income Taxes ­ All income is reported on owner’s personal taxes.
● Longevity/Continuity ­ This business can continue for as long as the owners wish. Also, partners can be bought out for their share in the business.
● 

Control ­ The control of the business is shared between the partners, although they can come up with an agreement to help determine who controls what.
● 

Profit Retention ­ Profit and loss are divided amongst all partners equally.
● 

Location ­ No forms are necessary. Wherever the owners see fit, the business can move. ● 

Convenience/Burden ­ The same as in a sole proprietorship, there are no additional requirements for the business regarding complying with reporting, meetings, etc.. The biggest drawback for this type of business is that the partners are seen as one in the same in every way, meaning that if one does something bad or harms the business, both are held responsible.
Limited Partnership ­ There are general partners and also limited partners, who can share all profits. When there are debts, the limited partner is only responsible for as much as they have put in.
● 

Liability ­ General partners still have the ability to gain or lose everything. Limited partners can gain whatever profits come from the business but if the business does not do well, this type of partner can only lose what they have invested.
● Income Taxes ­ These are still filed as personal taxes for the general partners.
● 

Longevity/Continuity ­ The partnership can choose its longevity or continuity. This is normally the choice for short­term projects or ventures. If one person in the partnership decides to leave, the other partners can buy the portion that partner owned or completely







dissolve the limited partnership. When the remaining partners decide to buyout the leaving partners share, they must agree to new terms. This business has the potential to continue for as long as the partners are alive.

Control ­ Although the limited partner is termed “partner,” they do not have a day to day hand in the business or the decisions. It will still be run by the general partners.

Profit Retention ­ Profits from a limited partnership are taxed once, which is after the profits have been split by partners.The amount each partner is taxed depends upon their tax bracket. There is no max on the amount this partnership can make, but if there is loss, the limited partner cannot lose more than what they came in with.

Location ­ Forms must be filed in compliance with the state laws, so moving it to another state would require re­filing.
 The unlimited partners decide on expansion or relocation.
Convenience/Burden ­ General partners receive the financial backing from a limited partners but those limited partners are not allowed to participate in the day to day activities of the company. Because of that, general partners can lose more than a limited partner. Also, unlike a general partnership, a LP must have documents filed with the state and therefore moving a business is not as easy.

Regular C Corporation
 ­ This is normally reserved for larger companies, and it requires a substantial amount of people to operate this type of company.
● Liability ­ As with limited liability, the shareholders can only lose the amount they invested in the company. If they are sued, they can ask creditors to cover it.
● 

Income Taxes ­ This corporation is subject to double taxation. First they must pay federal, state and local taxes then they are required to pay dividend tax.
● 

Longevity/Continuity ­ This corporation can succeed its initial business owners. It can be sold to other owners and passed on after death.
● 

Control ­ Shareholders will elect board of directors, who in turn select officers. The title is held by corporate entity.
● 

Profit Retention ­ Board of directors determine the amount of profit to be retained and the dividends that will be divided amongst shareholders.
● Location ­ This is a separate, legal entity that must have forms filed with the state so moving it would require re­filing.
● 

Convenience/Burden ­ There are annual meeting requirements, officers, board members, directors, high tax rates and usually a lot of people involved.
 S­Corporation
 ­ The added benefit to S­Corporation (over a Regular C­Corporation), is that this type can choose how they would like to be taxed.
● Liability ­ As with regular C corps, shareholders investments are at risk.
● 

Income Taxes ­ Unlike C­Corp, an S­Corp is a non­taxable entity. Shareholders pay tax on the portion of the income they receive, and the amount of tax depends on what bracket they are in.
● 

Longevity/Continuity ­ This type of corporation can be in business for as long as it would like, because the owners and shareholders can pass down their share as well as sell it.
● 

Control ­ There is a Board of Directors (normally those shareholders who have a large share of the business). They serve as the primary decision makers.
● 

Profit Retention
 ­ The profit will be divided amongst the shareholders and then taxed individually. ● Location ­ This is a separate, legal entity that must have forms filed with the state.
● 

Convenience/Burden ­ S­Corps can only have one class of stock, no more than 100 shareholders who must be US citizens or resident aliens and those shareholders cannot

be a member of an affiliated group of companies.
 Limited Liability Company
 ­ these types of companies get the best of both worlds in that they get limited liability, tax choices, and can have small management.
● Liability ­ This is the same as a limited partnership in that a member can only lose what they invested.
● 

Income Taxes ­ Limited Liability owners can choose yearly to be taxed as a corporation or partnership.
● 

Control ­ This type of company can be run one or as many people. It does not require a certain amount, allowing for as much or as little control as one would like.
● 

Profit Retention ­ Owner/members cannot lose more than the initial investment but can gain unlimited monies! They are report profit or losses from the business on their personal taxes.
● 

Location ­ Start up costs with state filing are usually low, so moving this type of business would not be awfully difficult.
● 

Convenience/Burden ­ This type of company must be careful not to pierce the veil and use business funds for personal reasons. Also, the Board of Directors must be in agreement for any move or expansion of the business.
● Longevity ­ This varies from state to state but can be indefinite if state law allows. Death, retirement or resignation all allow disruption to longevity; however many families start
LLC's so they may maintain control after death but must be sure to add other members as owners so LLC doesn't dissolve upon founding member's death.…...

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