Lit 1 Task 1

SOLE PROPRIETORSHIP: Sole proprietorships are the most common form of business in the United States. You and your business are one in the same. While being your own boss as its advantages, like working your own hours and collecting all profits made by the business, there are some disadvantages. For starters is coming up with starting working capital. Most Sole Proprietors have to seek funds from other sources.

There are three types of business entities: sole proprietorship, partnerships, and corporations. Sole proprietorships are businesses owned by an individual person. They are easy to form, but are not taxed. Instead the individual business owner is taxed on any monies acquired on behalf of the business (Kubasek, 2012. Partnerships are businesses that are owned by more than one individual owners. The big thing about partnerships is that each partner is personally responsible for the acts of the other partners in the business . (Kubasek, 2012 Corporations are businesses owned by multiple people to include shareholders (Kubasek, 2012). They can sue and be sued and are subject to a host of rules and regulations set forth by the government.

Common stockholders are the basic owners of a corporation, but few stockholders of large corporations take an active role in management. Instead, they elect the corporation’s board of directors to represent their interests. Board members seldom get involved in the day-to-day management of the company. They establish the basic mission and goals of the corporation and appoint

Sole proprietorship: Is the simplest and most common business structure. There is no legal distinction between the proprietor and the business, which means it is autonomous. You are entitled to all profits and responsible for all your business's losses and liabilities.

Location- The only reason location is an issue is filing for local and state permits based on the business type; may pick up and move when and wherever owner desires. Would need to file a DBA form if owner is operating under a

INCOME TAXES- S-corp differs from C-corp taxation; taxes are passed through to the shareholders only. The company itself does not pay taxes.

* Taxes are paid through the corporation on a corporate tax return. It is separate from the owner’s income taxes, commonly referred to as shareholders. Shareholders also include income or losses on stocks sold or dividends earned on their yearly individual tax return.

Sole Proprietorship: A type of business that is owned by and run by one person with no legal difference between the business and the owner. It is easy to form with no cost or time to initiate. It gives the owner the ability to self-govern the business. There are drawbacks; only one owner can be established not allowing a partner. Also, unlimited liability puts the owner’s personal assets in jeopardy with the creditors.

C corporations are the only business structure subject to a double tax. A C corporation may be dissolved or fall into bankruptcy, but it may live in perpetuity because most states require that corporate charters provide for perpetual existence. Transfer of stock, change of shareholders or death of an owner does not alter the perpetuity

Corporations are the biggest business organization forms in the United States. A Corporation is a “fictitious legal entity that is created according to statutory requirements”. Corporations generate more that 85 percent of the country’s gross business receipt and can range in size from one to hundreds of owners (478, Cheeseman). Shareholders are owners of their corporation and have a say in the business matters. There are three types of corporations. A domestic corporation is a corporation that is in the state in which it is incorporated. When a corporation is in another state or jurisdiction outside of where it was incorporated it is a foreign corporation. An alien corporation is when the corporation was incorporated in another country.

Due to the fact that corporations are separate legal entities from their owners, C-corporations are taxed separately requiring the filing of IRS Form 1120 each year to report its income and take advantage of any credits or deductions for which the corporation may be eligible (Internal revenue Service (IRS), 2012b). Income tax rates for corporation are tailored to corporations and as such are different from those

Limited Liability Companies are treated by default as a Partnership (flow-through) for tax purposes, however, because of the “check-the-box” regulation Section 7701, LLC owners can elect to have their entity treated as a C Corporation for tax purposes and then opt for the S corporation tax treatment which would allow them to be taxed as a flow-through. Corporation are treated by default as C corporations and are taxed based on corporations’ tax rates, the “check-the-box” regulation allows the business owners to opt for the S corporation option and pay taxes as a flow-through corporation.

The ownership claim in corporations is defined by the amount of shares owned and can be easily transferred by selling off the shares. Because individual share can be easily bought, raising capital is easier for a corporation than the other business structures, particularly in “S” corporations. In corporations, the stockholders are protected from the liabilities and debts of the company, although they pay higher taxes on the dividends received from the company. A corporation also ensures the continuity of life if one owner dies. A corporation has more legal issues to handle than the other business structures because it is large and publicly traded. Everything needs to be documented and filed and general meetings must be held at least per annum. All actions affecting the operations of the company, such as mergers and establishing new business ventures, must be discussed, recorded and filed. This also means that because corporations trade publicly, they are required to provide extensive financial statements such as the balance sheets, income statement, cash flow statement and retained earnings statement. They need these statements to attract more investors and increase capital. Corporations are also liable to the SOX

The tax on a company’s profits which is the difference between the company’s gross income and its business costs is thus called the corporation tax. Now it may appear that as the tax is on the profits of the

The S corporation is formed by filing Articles of Incorporation with the Secretary of State. The S corporation issues stock, is governed as a corporation, has shareholders (owners), and provides similar protection from liability as a C corporation. The S corporation shareholders’ personal assets cannot be seized in order to fulfill the business’s financial obligations or liabilities. The S corporation is also treated as a pass-through entity for federal tax purposes. Unlike the C