University of Phoenix Material
Business Forms Worksheet
There are seven forms of business: sole proprietorship, partnership, limited liability partnership, limited liability company (including the single member LLC), S Corporation, Franchise, and Corporation.
1. Research and provide three advantages and three disadvantages for each business form.
2. Provide a 100- to 200-word summary in which you provide an example business that you would start for each form. What is legally necessary to file in order to form that business? Discuss at least one of the advantages and one of the disadvantages of that form.
Sole Proprietorship
Advantages
1. Income taxes
2. Continuity of business
3. Control of business
Disadvantages
1.
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A Limited Liability Partnership Alternative Security Provision transmittal form must be filed as well. Once these documents are approved, the Secretary of State will return stamped copies of the forms as well as a Certificate of Registration to the partnership.
Limited Liability Company, (including the single member LLC)
Advantages
1. Freedom in management
2. Limitless ownership
3. Pass-through taxation
Disadvantages
1. Taxation
2. Building capital
3. Government regulations
Summary
A limited liability company consists of a single owner, or sometimes more than one owner, and are not taxed as separate business entities. All profits and losses pass through the business to those who own the company. Owners must report profits and losses on their personal tax return filing as a corporation, partnership, or sole proprietorship. If the LLC is ran by a single owner, they file a 1040 Schedule C form as a sole proprietor. Partners file a 1065 form consisting of a partnership, and a form 1120 is filed if the LLC is filing as a corporation. The LLC must be registered such as the State Corporation Commission, Department of Commerce and Consumer Affairs, Department of Consumer and Regulatory Affairs, or the Division of Corporations and Commercial Code. The great thing about an LLC is that the owner has freedom in management. The owner is able to run the organization as they see fit not answering to anyone,
Bazaar Ceramics has been operating for 20 years and have grown to a point where they need to reach a wider audience in both a sales aspect and an advertising one.
Income Taxes- Taxes are paid as income tax, unless the limited partnership is classified as a corporation by the IRS for tax purposes. In order to keep from being taxed this way, you would have to stick solely to the contract as written, and keep away from operating outside of the agreement.
Income Taxes: The owner of a Sole Proprietorship pays taxes in the earnings of the company as personal income.
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Limited Liability Company (LLC) combines the tax advantages of a partnership with the limited liability aspects of a corporation. LLC’s are governed by the Uniform Limited Liability Company Act (ULLCA). All members of the LLC enjoy limited liability unless there is serious misconduct is committed by said member(s), or a member fails to follow through on an obligation. All this should be outlined in your preformation contract. You will have more flexibility with taxation and options on how to manage the company. It would be advisable to also have an Operating Agreement. This will dictate how management will be hired and fired, division of profits, how to transfer interest in the event a member chooses to opt out or dies. What steps to take in the event of dissociation of a partner, and if it causes the dissolution of the LLC. Most importantly how the members vote in the LLC. The weight of the members vote is in accordance with the member’s capital
The last of the four types includes the limited liability company, also known as a LLC. An LLC is an unincorporated form of business that carries characteristics of all of the other three forms of business. An LLC can choose to be taxed as a partnership, the owners can manage the business, and the owners have limited liability for debts and obligations of the partnership. LLC’s are
a general partnership. It should be noted, however, that the specific steps and requirements to start an
The managing member’s share of the profits is considered earned income and is therefore subjected to the self-employment tax. Also a member of an LLC cannot pay themselves wages from the profits of the LLC. “The great flexibility that is afforded by an LLC makes it one of the most popular types of business formations used” (Waller).
Limited liability company is a separate entity that separates the owner of the business. LLCs are no longer new and untested legal entity, they recognized in all fifty states and have established case law and statutes.
response so that it is easy to make comparisons among the six forms of organization. You
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Some sole proprietorship pros would be; owner is in complete control and receives all the profits, flexibility, ease of creation and maintenance. Some cons would be; the owner is personally liable for all torts and
Limited liability for the limited partners in a limited partnership. These partners can contribute the capital in a partnership without risking their personal assets.
Those legal structures are: sole trader,partnership,partnership with limited liability(LLP),private limited company (LtD) and public limited company (PLC).
Compared to the sole proprietorship, the LLC offers the advantage of raising additional capital to fund projects. Since you have new partners that just invested in the business you just