Corporation
This form is extensive and requires a tremendous amount of involvement of all members. The advantages of this business form is all liability is retained by the corporation, however, if the bank is requiring specific personal guarantees by the brothers, either they agree or offer assets as collateral to alleviate no other liability other than the assets pledged. This form allows the business to be a separate unit from the owners and shareholders. Shareholders own the business and are limited in their liability solely for the amount invested into the company. This means the owners are not managing the business, meaning shareholders elect a board of directors to manage the business. The business and shareholders are taxed on the profits and dividends respectively. This indicates the business is double taxed and is much higher in this form than in all of the other forms. However, the Subchapter S Corporation provides for the same flow through benefits of the LLC. The significant difference is the corporation is established by the Federal Government instead of at the ...
A Subchapter S Corporation is a form of corporation that meets the IRS requirements to be taxed under Subchapter S of the Internal Revenue Code. The S corporation is more appealing to small-business owners than a standard corporation. That 's because an S corporation has certain tax benefits and provides business owners with the liability protection of a corporation. S corporations require scheduled director and shareholder meetings, minutes from those meetings, adoption and updates to by-laws, stock transfers and records maintenance.
Liability: Investors have limited liability. This protects investors from having litigation brought against them. If the investor is a managing partner, however, they then could have their personal assets and property employed to satisfy any debt the S Corp has accrued. Income Taxes: An S Corp is not a taxable structure.
Capital is a major factor for decision making. Since the business involves a group then the three forms of business exposes the group to a greater capital availability. The liability of members is also an important factor. The partnership offers unlimited liability to the members of the partnership while the corporation and Limited Liability Company allows the members limited liability and thus their personal assets cannot be interfered with in the event of a liability. The decision making process is for the business associations but the input of all members results to the making of good and informed decisions. Finally, the taxation practices for various forms of associations informs the decision. Corporations are often taxed twice whereas the LLC and partnership business is taxed
The limited partner only risks what they invested in the business. The downside is if the limited partner becomes active then they could potentially lose personal assets. The S corporation is a more favorable tax option on income. The disadvantage is there is certain requirement that must be met. The LLC is a great option. With this type, the risk is only what is invested unlike sole proprietorship. It is easy to set up, and has tax advantages. The downside is if a corporation wanted to switch to C, it would have to pay additional taxes. I do believe the option they picked is best for them at that time. C has tax advantages. If they started with LLC and later wanted to change, it would cost them. C is a great way to get capital as well.
Does the capital structure of a firm really matter? If so, how and why does it matter? Practitioners and scholars of corporate finance have debated these questions for several years and have found it difficult to come up with definitive answers. The classical work of Modigliani and Miller (1958) provided the impetus for what is now, orthodox corporate finance theory on the optimal capital structure of firms. They postulated that, in a perfect or frictionless capital market, the choice between debt and equity financing has no material effect on the value of the firm. Stern and Chew (2003) noted that following the Modigliani-Miller propositions, academic researchers in the 1960s and 1970s turned their attention to market imperfections that might make firm value depend on capital structure. They further noted that the main suspects were a tax code that encourages debt by making interest payments but not dividends tax-deductible and expected costs of financial distress that rise with increasing amount of debt. Towards the end of the 1970s, they noted, there was also discussion of signalling effects, such as the tendency for stock prices to fall significantly on the announcement of new equity issues and to rise on the news of stock buyouts. These effects seemed to confirm the existence of large information cost that could influence financing choices in the predictable ways.Myers (1984), however, noted that there is a conflict which has existed among the different theories and referred to is as the “capital structure puzzle.” Barclay and Smith (2005) noted that it has been the difficulty of coming up with conclusive tests of the competing theories. Firstly, they noted that model on capital structure typically are less precise than...
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.
In 2001, Australian legislation that sets out laws that govern business entities under both state and federal governments was passed. Implemented as the Corporations Act 2001 (Cth), the Act sets out rules and regulations for the standard that businesses should be operating in Australia, including the creation of new companies and how they conduct their operations.1 The Act is administered under the Australian Securities and Investments Commission (ASIC) who are a government body responsible for implementing corporate laws and holding businesses accountable for their wrongdoings.2 In relation to business ethics, stating that corporate law was designed to enhance this area of business implies that legislators have business ethics as a priority when determining the purpose of new legislation that is being passed. Business ethics is the body of principles that business people ought to follow when behaving in the workplace, as well as the moral attitudes they should adopt.3 By incorporating provisions in the Corporations Act 2001 (Cth) that enable ASIC to deal with those who do not follow
The core company types offered nowadays is a sole proprietorship, partnership, limited liability company (LLC), and corporations. A sole proprietorship is a company with a singular proprietor that makes all key decisions for the company. A characteristic of a sole proprietorship is that owner is responsible for each and every liability of the company, and the company ceases to exist upon the death of the companys owner. The proprietor assumes all the hazards of the company, and all private assets are used for collateral, even if they are not used in day to day business activities. A partnership is an arrangement involving two or more parties that merge into one entity to pursue a company endeavor for revenue. Each affiliate contributes cash, assets, workforce, labor aptitudes, and each affiliate splits the revenues and debts of the company. Similarly, each affiliate accepts unrestricted personal accountability for the debts of the business. Limited partnerships reduce the amount of personal accountability each individual assumes for the liabilities of the company founded on the percentage each
1993): 55-65. In Beachamp, Tom L., and Norman Bowie (eds). Ethical Theory and Business. 7th edition.
For example, the branches income will be subject to taxes of the country it resides. The branch is an extension and the parent organization and is responsible of meeting the objectives related to customer service and sales. Additionally, the host countries may require that a percentage of the middle and senior leadership team be local citizens and business licenses are time sensitive and must be updated as shifts in business regulations are noted (Pearce & Robinson, 2011, p. 131). Next, equity investments, which are provided by private venture capitalists or firms, are needed to raise money or gain expertise in order to grow the business (Pearce & Robinson, 2011, p. 131). Investors seeking this method only see a return on their investment when they sell their shareholding to other investors or the organization liquidates their assets. In order to make an investment, the venture capitalists will evaluate the firm on the debt to worth ratio (Keythman, 2015). In other words, it a relationship of how much debt will be taken on compared to how much the business is worth as too much debt reduces the value of the owner’s stake. Finally, wholly owned subsidiaries are noted when a company’s stock is 100% owned by another company, whereas a regular subsidiary is 51%-99% owned by a parent company (Schreine, 2015). For
A major challenge of doing business internationally is to adapt effectively to different cultures. Steve Kafka, an American of Czech origin and a franchiser for Chicago Style Pizza has decided to expand his business to Czech Republic. This is a risky decision and Steve anticipates he will face obstacles as he goes about setting up the new pizza outlet at this new location, Prague.
Finally I will state whether or not I agree with the given statement.cobd bdr sebdbdw orbd bdk inbd fobd bd. When a company receives a certificate of incorporation it has a 'separate legal personality'. In law the company becomes a legal person it its own right. The fundamental concept to become familiar with when starting up a business is the idea that the business has a legal personality in its own right, particularly when it assumes the form of a limited liability company. This essentially means that if one commences business as a limited liability company, then the corporation... ...
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.
Before a partnership formation is imminent, the business needs to decide on which type of partnership to form. There are three types of partnerships: (1) general partnerships, (2) limited partnerships, and (3) joint ventures. All three partnerships contain two or more owners, but all partners assume equal division of ownership, liabilities, and profits in a general partnership. Limited partnerships offer limited liability protection based on each partner’s contribution percentage. Joint ventures are classified as general partnerships with limited existence periods. Once a type of partnership has been determined, the business fulfills a series of requirements before the partnership can be successfully formed. The first step is to register
Corporate Entrepreneurship can be seen as the process whereby an individual or a group creates a new venture within an existing organization, revitalizes and renews an organization ,or innovates. Zahra’s(1986) definition of corporate entrepreneurship suggests a formal or informal activity aimed at creating new businesses in established firms through product and process innovations and market developments,whereas sathe(1985) defines corporate entrepreneurship as a process of organizational renewal. Corporate Entrepreneurship has emerged as a much needed ingredient contributing towards the growth of any organization under a changing business environment.