Sole proprietorship, partnership, C corporation
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In determining the type of business entity to use (that is, a sole proprietorship, a partnership, or a C corporation), what factors would you emphasize to a client?
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Solution Summary
Advantages and disadvantages of Sole proprietorship, partnership and C corporation have been discussed.
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In determining the type of business entity to use (that is, a sole proprietorship, a partnership, or a C corporation), what factors would you emphasize to a client?
Sources:
http://www.nolo.com/lawcenter/ency/article.cfm/objectID/47AAB89C-44E0-487C-BC53B4E00498CC85
http://www.accessincorp.com/corpfaq.htm
http://www.expertlaw.com/library/pubarticles/Business_Law/business_form.html
http://www.ct-clic.com/business/entity_definitions.htm
The factors to be emphasized are:
Sole proprietorship:
1. A sole proprietorship is the simplest form of business to start. A sole proprietorship by definition means "one owner". Thus it is owned and operated by an individual who assumes all responsibilities for the business, including assets and liabilities. Most small businesses operate as sole proprietorships, this being the simplest form of organization and allowing the single owner to have sole control and responsibility.
2. It does not have a separate existence apart from its owner. Thus the business may use a trade name, but the business does not have a separate legal existence apart from its owner.
3. There is no shield against liability, and a sole proprietor's personal assets can be reached to satisfy business debts or liabilities. The owner of a sole proprietorship is personally and fully liable for all business debts; thus, personal property could be taken to pay business debts.
4. A sole proprietorship is subject to pass-through taxation, with profits declared on the owner's personal tax return. Thus business income is taxed as personal income.
5. A sole proprietorship is not registered with the state. No filing is necessary to form a sole ...
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