Business Entity
A sole proprietorship is one of the best and cheapest forms of business entity a person can engage in today. Many businesses around the world today are operated as a sole proprietorship. The business is operated and managed independently and also the business transactions are done by the sole proprietor. The owner becomes also responsible for the liabilities and debts of the business. The owner makes the decisions of the business, he can decide who to give the business to and who and when to sell (Bryman & Bell, 2015). Advantages of the sole proprietor business are the fact the owner has the total control of the business including the decision making step of the business, the transfer can be done in any particular instance and that there is no corporate tax paid. A sole proprietor can be held accountable for the business in terms of the debts.
The partnership is a business entity that involves more than two people who come up with a common business idea which can be productive. Partnership type of business allows the partners to share the profits according to the contribution of each partner. Advantages of the partnership business are that the partners are included in the decision-making process, therefore, making it easier to come up with a productive business idea. The responsibility of the business is shared amongst the members and this allows the business to be more flexible as one can engage in other areas without affecting the continuity of the business (Bryman & Bell, 2015). Disagreements are one of the disadvantages of the partnership business since every member has a different idea and wants it implemented accordingly. Taxation is also a disadvantage for the partners as each partner is required to make individual tax returns. Profit sharing according to the contribution of each member is inconsistency as some members can opt to remain out of the business management but still earning like the rest of the members (Ross, 2016).
A limited liability partnership is the type of business structure where the partners have protected accordingly against the carelessness of the other partners in the business. An advantage of the limited liability partnership is the capability of protecting each person from the mismanagement of all other members (Hertz et al., 2015). This allows the partnership to be strict and also beneficial to the partners as they will act according to the rules of the partnership agreement. In the case of lawsuits, the responsible person is dealt with by the law instead of the business. Tax advantage since each person is responsible for filing the returns according to the expectations of the internal revenue services. The disadvantage of the limited liability partnership is the essence that some of the tax authorities in certain countries regard the business as personal and therefore charge according to individual tax returns (Hertz et al., 2015). Limited liability partnership types of businesses are not recognized as being legal and therefore difficult to establish except for the lawyers and doctors who are given the advantage of being capable of handling such a business entity.
Limited Liability Company is a company that has some legal protections which are guarded against the liability of a person but the issue of double taxation does not apply in this case. Members of the type of business are taxed independently just like the sole proprietors and this means that the business output is taxed the personal income tax before it reaches the owner (Bryman & Bell, 2015). The policy of this kind of business is that each person or member should act according to the failure of the law to which the family and your business will be exposed and therefore very important to have a lawyer during the formation and specific location of the business. The advantage of the limited liability company is the idea of having limited liability. For this case, if the business is sued on any terms the members are safe as the personal accounts, estates, and the personal assets are very protected by the law. Corporations are liable to some of the taxes even when they have a separate business meaning they will be taxed twice but the Limited Liability Company is a single entity and therefore treated as personal income and this allows the federal taxes not to apply in this case (Hertz et al., 2015).
A corporation is a form of a business entity that is registered as being a public kind of company and therefore recognized as a separate entity from the owners of the business. The advantages of the corporation are the idea that the liability of the owners in relation to the creditors is always limited in terms of their investment in the company. This case means that the properties and the contributions of the owners are not to cover the cost of paying the creditors’ if the company is liquidated at any one point (Bryman & Bell, 2015). The company can get added capital for business continuity from the stock market. Ownership of this kind of business is determined by how many certificates a person has and this ensures that the transfer of the company is cheap and easier. Disadvantages of the corporations are the establishment of the business entity which is a tedious and complex process which requires the registration according to the central regulatory authority. Double taxation is experienced in this kind of business entity. The first tax is charged as income tax while the rest is charged after giving dividends to members.
The first type of business entity is a sole proprietorship where the owner controls the income and the time to open the business including the advantage of not sharing the profits of the business. Brett and Jamal starting a partnership type of business will enhance their profit earning capability as they will share equally according to how each has contributed to the business (Ross, 2016). The benefits acquired will be used to their advantage since there are no legal challenges which face the business according to the laws. Rebecca’s idea to start a partnership is productive since the members will earn according to being a member and also she will earn according to how many members join the business idea. With the partnership type of business, the members will be charged tax according to personal earning. The liability of the business is according to the individual mismanagement, therefore, making it a burden to other members in the partnership. Samantha wants to start a sole proprietor type which is cheap to start and run (Bryman & Bell, 2015). Taxation is individual and also the liability is to her since she controls all the processes of the business. Daniel’s idea to start a corporation is expensive and difficult to establish the process of registering such a company is expensive. Double taxation must apply and the liability is to the business and not to the properties of the owner.
The best type of business to start is the sole proprietor type by Melanie. It is easy to establish and requires no complex formalities to start or run. The benefits and profits acquired are not shared and also not double taxed at any instance. The business can be inherited and also sold at the will of Melanie therefore cheap to run and control.
References
Bryman, A., & Bell, E. (2015). Business research methods. Oxford University Press, USA.
Hertz, G. T., Beasley, F., & White, R. J. (2015). Selecting a legal structure: revisiting the strategic issues and views of small and micro business owners. Journal of Small Business Strategy, 20(1), 81-102.
Ross, D. F. (2016). Introduction to e-supply chain management: engaging technology to build market-winning business partnerships. CRC Press.
