The purpose of this memo is to aid in Mrs. Gloria Smithson’s decision on which classification of business she should open with my personal recommendation as a business planner and accountant. The intention of this report, is to provide an overview of three different types of business formations that are being recommended for consideration. A significant amount of research into the business law will be further needed prior to the opening of the business to determine which state is best to incorporate into based on their own business laws. In addition, there are an increasing number of hybrid versions of business formations that should be explored in the chosen state once the overall type of formation has been selected. With this being …show more content…
Besides fraud cases personal assets of the owners, partners, shareholders cannot be seized to repay debts. For a corporation, “The limited liability of shareholders means that they are liable only to the extent of their capital contributions and do not have personal liability for the corporation’s debts and obligation.” (Cheeseman, 2013, 479) In a LLLP there are two types of partners, general and limited. Both types hold, “...No personal liability for partnership’s debts and obligations...” up to the “capital contribution” (Cheeseman, 2013, 472) that was given to the company. The same liability is set for the LLC styles of business, “members of an LLC are not personally liable to third parties for the debts, obligations, and liabilities of an LLC beyond their capital contribution.” (Cheeseman, 2013, 536) All three boost an impressive corporate veil to protect personal assets. A corporation will become the most useful to the company long term if to plans to go global with its widget and is the recommended business type. This type of business formation will allow for the separation of responsibility in the company and who ultimately is the owner. “This category contains entities that generally have the following three constituents: shareholders, officers, and directors.”(Franklin, 2016, p. 581) This way all parties looking to invest and contribute to the business can have a
As a hybrid of partnerships and corporations, LLC’s provide limited liability for debts and flexibility to be taxed as a partnership or corporation (Staring and Naming a Business Presentation, 2012, Slide 5). Some specific advantages include being empowered authorities in the management of the business, diversity of members, limited liability, pass-through taxation, and less paperwork (appreciated by many). A drawback of this business structure is the need for a tailored operating agreement that specifies the specific needs of the
The organizational forms a company might have as it evolves from a start-up to a major corporation are: sole proprietorships, partnerships and corporations. The advantages of a sole proprietorship are that is is easily and inexpensively formed; is subject to few government regulations and it’s income is not
I think a partnership is the best business organization for a company. A Partnership consists of two or more individuals in business together. Normally, all general partners have an equal voice in management. Partnerships have many advantages, for example, Partnerships are relatively easy to form; No corporate income taxes. Partnerships declare income by filing a partnership income tax return. Yet the partnership pays no taxes when this partnership tax
A limited liability company protects each partner from personal liability for certain obligations of the company. An important difference from other partnerships is that each partner is liable for the debts and obligations of the partners. With limited liability Company, each state has its own laws governing partners for these vessels. Some states allow only certain professions, such as lawyers and accountants to form LLP. Some states only provide protection from liability for negligence claims, leaving personally responsible for other types of requests partner. For tax purposes, profits are divided equally between the partners and the partnership is not taxed separately.
responsible for business debt, and has one or more limited partnership who are only liable to
* Limited Liability - Unlike partnerships and sole proprietorships, corporate shareholders are not liable for any of the corporation's debts.
There are so many options available as to how they can structure the new business. The appropriate business entity for any individual(s) will depend on their particular facts and circumstances.
In setting up a new business the first step is setting up the best business structure for the need of the business. There are many different things that need to be looked at in order to determine the correct entity that will be used. Will there be partners is a big question in this determination, another questions which is the most correct for the business legally. Another consideration needs to be the legal liability as well as the tax liabilities in considering the best choice for the entity of the business.
John, when starting a business one has several options in the type of business structure to use. The different types of business structures are the sole proprietorship structure, the partnership structure, the corporation structure, the S corporation structure, and the limited liability company structure. Each structure has advantages and disadvantages and possible tax consequences.
response so that it is easy to make comparisons among the six forms of organization. You
Owners are not personally responsible for debts the business may accumulate. The ownership of a limited company is divided up into equal parts called shares (Bbc.co.uk, 2014).
Limited liability partnership (LLP): Owners are not liable for debts, obligations or other liabilities of the partnership which are a direct result of negligence, wrong acts or malpractice of an agent, employee or partner of this partnership (Bhattacharyya. A.K., 2011, p.5). However, a partner will still be liable for negligence, wrong acts or malpractice conducted by an agent, employee or partner who is under his / her direct supervision.
The business's form (is the business operated as a sole proprietorship, a partnership, a corporation (even an individual can form a corporation), a franchise, etc.? And the particular advantages and disadvantages of that form from the owner's perspective when compared with other forms he or she might have chosen
This means that there is more than one person own the company and have managed right. The advantage is you can trust each other and split the work duty equally between three for us. The drawback of being your own boss is when you distraction by personal matters and your business will crash.
As with any kind of business formation, there will always be, to some extent, negative aspects associated with the creation. To this date there is no perfect form of business entity. When deciding on which entity is best suited for a business, there are many things to be considered. Prior to deciding on a business structure, some major points to be thought about are both the legal and tax ramifications associated with the entity chosen. Another criteria that should be considered are the costs connected with the entity type. These cost include the cost of formation as well as any continuing administrative cost that may be incurred. (“Choose Your Business,” 2011)