Ownership
Kollin Kennedy
Sole Proprietorship
Definition: The simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. Owned by one person. Allows people to report business income and expenses on their individual tax returns. Summed up in a phrase "You Are in Business"
Advantages:
- Sole or transfer can take place at the discretion
- No corporate tax payments
- Minimal legal cost to forming a sole proprietorship
- Attractive to small investors because they are relatively an easy start up
- The one person makes all of the decisions in the business
- Can hire employees
- Investors want usually invest in a sole proprietorships
- All responsibilities and business decisions fall on the shoulders of the sole proprietor
- Your business doesn't exist as a separate legal entity
- The owner remains personally liable to any losses or debts
- Must pay self-employment taxes
Regulations to Follow
- Business name for Sole Proprietorship - Must be a legal and appropriate name
- No Formation Requirements - you are not required to file any documents with a state agency
- Registering to do Business- Research to see if there are any rule that may apply in area
- Income And Self Employment Taxes
Some More Facts:
- The IRS says a domestic LLC in which the sole proprietor is the only member is not a sole proprietorship if he/he treats the LLC as an incorporated business.
- Can use IRS publications 334, Tax guide for small businesses, to determine tax filling a payment schedule
Examples:
A Tutor Or Computer Service Repair Company
Partnership
Definition- A single business where two people share the ownership. The partners contribute to all aspects of the business such as, property, money, labor, and skill
Advantages:
- Provides moral support and will allow for more creative brainstorming
- Easy to establish
- May benefit from the combination of complimentary skills of two or more people. There is a wider range of knowledge, skills, and contacts to chose from
- Can be cost-effective as each partner specializes in certain aspects of their business.
- A major disadvantage is the unlimited liability. General partners are liable without limit for all debts contracted and errors made by the partnership
- Usually has limitations that keep it from becoming a large business.
- The only requirement is that in the absence of a written agreement, partners don't draw a salary and share profits and losses equally.
- There are three types of partnerships, general partnerships, limited partnerships, and joint ventures
- Limited liability partnerships do have a writing requirement
- Apple
- Microsoft
Limited Liability Partnership (LLP)
Definition: A partnership in which some or all partners have limited liabilities.
Advantages:
- Liability Protection
- Tax advantages
- Flexibility
- Multi State Considerations: Some states recognize LLPs formed in other states, and some do not. This could affect the limitation of liability in the other states. A state that limits LLPs to certain professions may not recognize an LLP formed in a state that has no such limitation
- Liability Protection- corporations and limited liability companies offer more comprehensive protections and are very popular with business owners.
- LLPs are not really partnerships
- LLPs are certainly more complicated to set up than ordinary partnerships because they are bound by many of the same requirements as limited companies
- Ernst And Young
- KPMG
- PriceWaterHouseCoopers
Corporation (C Corporation)
Definition: A company or group of people authorized to act as a single entity and recognize as such in law
Advantages:
- Limited Liability- Shareholders personal assets are protected.
- Ability To Generate Capitol- Ablilty to raise funds through the sale of stock
- Attractive To the Potential Employees- Able to hire high quality and motivated employees. They offer competitive benefits and the potential for partial ownership
- Time And Money- Costly and Time consuming to start and operate
- Double Taxing- First, when the company makes a profit, and when the dividends are paid to shareholders.
- Additional Paperwork
Policies:
- Employee conduct
- Substance abuse
- Equal opportunity
Facts:
- Dominate the global economy as well
- The dominance is actually really scary to a very high degree because of overall wealth
Examples
- Adidas
- American Airlines
- Wendy's
- Starbucks