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What is a sole proprietorship what are the major advantages and disadvantages of this form of business ownership
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SOLE PROPRIETOR DESCRIPTION most all new business start as sole proprietorships because of the simplicity to them. the only legal hurdle to starting a sole proprietorship is applying for the local permits and licenses that apply to the area of business. This is a very simple business organization to quit as well. When the owner wants to stop doing business they can simply stop taking new business. The owner has the ability to grow or contact its operation at will with no need to consult with a boss or board of directors most sole proprietorships operate on a small scale, the main factor that distinguishes a sole proprietorship is the sole responsibility of ownership and decisions. DISCUSSION OF THE KEY CHARACTERISTICS 1.LIABILITY: There are no limits on liability with a sole proprietorship, the owner is responsible for all the businesses debts and obligations. The earning power of a sole proprietor can be limited due to lack of capital. The sole proprietor is only able to obtain personal credit to expand the company, the bank will not treat the company as its own entity 2.Income taxes:Income earned by the sole proprietorship is income earned by its owner and is taxed as such 3.Longevity: the sole proprietorship has a limited lifespan once the owner dies or moves on from the sole proprietorship will cease to exist 4.Sole proprietors have complete control over the decision making process. 5.The profits of the company do not have to be shared with anyone, the downside is the liability and loss are also not shared with anyone else. 6.The implications of moving or expanding into different states is simple for a sole proprietor. They must simply register a new DBA whenever they move to a new state. There are advantage... ... middle of paper ... ... salaries are subject to self employment taxes 3.longevity or continuity of the organization:the longevity of the LLC is perpetual, the exception is when the state requires a fixed amount of time for the LLC to operate. 4. Control: the members of the LLC have the ability to set up control of the corporation as they see fit. 5.profit retention: The members decide how the profits are distributed and are passed through the corporation to the members 6.convenience or burden: When operating a LLC there is no personal liability to the partners or owners. ADVANTAGES Members are protected from collection of the LLC debts or liabilities Members can distribute profits is whatever way they agree on. DISADVANTAGES Self employment taxes are subject to the members of an LLC,the net income of the LLC is subject the Medicare and social security taxes Memorandum (Part B)
Liability – The business has limited liability. The owners and shareholders are generally protected from most lawsuits.
There will be more tax deductions available to you after Forming an LLC. A few of these deductions include benefits like a retirement plan, medical expenses, business trips and client entertainment. The IRS audit rate for an LLC is much lower than that of a sole proprietor. You can own and be employed by an LLC at time same time, eliminating the self-employment return from your list of necessary tax documents.
Limited Liability Companies (LLC) is “a form of business organization with the liability-shield advantages of a corporation and the flexibility
This paper will focus on the Limited Liability Company, commonly known as LLC. Limited Liability Companies are a comparatively new form of business structure. It came about in 1977 once Wyoming was the first state to consent to such an organization, which merged the tax advantages of a partnership with the limited liability benefits that come with corporations. It took more than ten years following that decision for the Internal Revenue Service, or IRS, to declare that an LLC would be considered a partnership when pertaining to federal taxes. During this time, none other than the state of Florida had introduced any LLC laws. This was due to the uncertainties surrounding LLCs when it concerned the tax outcomes of the entity. (Cartano, 2008)
Being the owner of LSU, Joe probably operates as a sole proprietor. It is recommended that the business change its entity selection to limited liability company (LLC). The main advantages to an LLC are the protection the LLC owners receive from business creditors, and the fact that the owners can still participate in the management of the business.
Liability: The individual whom the business is registered to is completely personally liable because there is no division between the person as an entity and the business as an entity. Legally they are synonymous with one another.
This company will exist for a set term of 20 years (which can be amended by a majority vote). The company may be dissolved at any time by a unanimous vote of the members or with the fore-coming of any event that makes it unlawful or impossible to carry on the business of the company. If the company is to be dissolved, the manager will wind up the company's affairs. On winding up of the company, the assets of the company shall be distributed according the following priority:
When a business is structured as a Sole Proprietorship, more than likely there is just one owner. Sole Proprietorship are the most common and easiest types of formation since they are not incorporated. Since a Sole Proprietorship is not a real legal entity, legally you are held responsible for anything and everything the business does. If there is an accident or your business is not profitable, your personal assets are at stake. Therefore, anything that you own can be taken from you if you cannot pay. When a person dies or stops doing business, the business easily can no longer exist. Management and the Operations of the business are held by one person only, the owner. When dealing with taxes for sole proprietorship, the income or loss is passed down to the owner personal tax return (1040) as a regular taxable income. Thus there is no special type of form to file for being in business. If the company has a loss, the owner can deduct a portion of their losses from their own taxable income. Trying to raise capital is difficult for th...
There are many different types of business structures, but if you own and operate a business that it is a sole
A Sole Trader is a business that is owned by only 1 person. They are
This hybrid form is different than the three traditional form of business. Some of the specialized types of partnerships have characteristics different that the standard form of partnership. In case of Limited Partnership (LP), general partners have unlimited liability, whereas limited partnership are only liable for the amount that they invested. The LP has no control on the business. In the case of Limited Liability Partnership (LLP), the partners have the joint liability for all actions of the partnership. Despite of this, all partners have limited liability regarding the professional malpractice. This is because an individual is only liable for his/her own malpractice, not of other partners. Limited Liability Company (LLC) is a hybrid form of business, which has characteristics of partnership and corporations. The members (owners) are taxed as if they were partners. This is a complex form of organization, hence setting up can be both time and resources consuming. The Professional corporation (PC) (called professional association (PA)), is unique form of business common among the physicians and healthcare professionals. In this form of business, owners have benefits of incorporation, and are liable for malpractice. This form of business are often used by private clinicians. PC has very tight restrictions so at least one member needs to be
It means there is no income tax on partnership firms but income tax is charged in individual capacity on total share including salary and interest received by each partner. The disadvantage associated with partnership is that sometimes business grows to large and share received by partner is less and if his other income is higher, partnership share received is also taxed at higher rates of federal income tax. b) Limited liability partnership (i) Ease of formation It is also very easy to form a limited liability partnership. It can be created by forming a partnership deed and is least expensive as well.
It is also very easy to form the limited liability partnership. It can be created by forming a partnership deed and is least expensive as well. It can also operate in multi states without getting a new permit for each state. A limited liability partnership can be formed with agreement and all or some partners may have limited
The definition of a sole proprietorship is essentially a business that is run by one person and owned by that person as well. Specifically, a sole proprietorship is separated from the other business entities because of the specific the legal dynamics between the business and the owner of the business. Moreover, because of this factor, sole proprietorships are usually easy to both form, maintain as well as dissolve if need be. In a New York Times article, the authors expressed that small businesses are typically sole proprietorships and as such, this is why it was selected as the business entity (1). Furthermore, the aforementioned reasons allowed for a rather rapid decision on the basis that with this entity, there is an ability of the owner to run it how they see fit.
...are easily transferred from one business form to another. If the plans are for rapid growth and possible transition of business forms an LLC is Ideal.