Unit 5 Individual Project Final Paper
qgoesp9e8Pamela A. Ward
Unit 3 Discussion Board
February 25, 2019
In order to pick the appropriate foundation for your business you have to look at each one
and choose the one that will fit your business.
Sole Proprietorship is the most common and the simplest structure to start a business. It
is a business that is run and owned by one person and you are the one that reaps all the
profit.
1. The Advantage of a Sole Proprietorship that it is easy to form and inexpensive, you
have complete control of the business and you make all the decisions.
2. The Disadvantage there is no separation between you and the business, and you face
challenges to raise money and you have no legal separation between you and the
business. Banks are skeptical of lending money to a sole proprietorship. (Sole
Proprietorship, n. d.).
General Partnership is usually two or more partners that are responsible for the business.
The assets and profits are shared between the partners and they can both share the income
on their taxes and there is no taxation to the business itself. A General Partnership is
inexpensive to form and has very little paperwork.
1. The Advantages of General Partnership they can pick and choose their management
structure and the partners can combine their financials and resources.
2. The Disadvantage of a General Partnership is the liability because you are held personally liable for the business debit and its liabilities. (Morrow, 2009).
Limited Partnership starting this type of partnership you are 100% liable and you are
at a high risk and there is more than one limited partner. In this partnership they are
not able to handle the management, and they do receive a share of the profit as a limited
partner. (Morrow, 2009).
1. The Advantages of Limited Partnership is that the partners can use their creative
expertise to make decisions that are important in managing the company.
2. The Disadvantage of Limited Partnership this partnership is only for lawyers and doctors. It limits the number of businesses under this partnership. The other drawback is that they are personally liable for their own negligence or the negligence of their employees that work for them. (Morrow, 2009).
C Corporation is one of the oldest forms of business in the country and it is the most used, and these corporation are regulated under state law, and they vary from state to
state.
1. The Advantage of a C Corporation is that it is separate and independent from its shareholders and it is protected from being liable for the business liabilities and obligations. The shareholder can sue in the behalf of the corporation, C Corporations stay in existence even if the owner dies.
2. The Disadvantage of a C Corporation is to form one you must have articles of bylaws incorporated. They must also have established meeting for their shareholders and select a board of director. To maintain a C Corporation is expensive to maintain and it has many legal requirements. (Crowell, 2019).
S Corporation is a corporation that will be taxed as a flow through entity, the S is an IRS reference code. The S Corporation election allows the shareholders to be taxed they cannot be taxed corporate level, they have no federal income tax so they are not doubled taxed like the C Corporation.
1. The Advantage of S Corporation is that it has limited liability for both management and their shareholders. They have no state requirements, and the District court know their existence which help to protect them from personal liability that could assist in them losing their personal assets. There is not start-up cost.
2. The Disadvantage of an S Corporation shares are subject to seizure and sale in court proceeding, they are only allowed to have 100 shareholders that must be U. S. citizens, employees and owners can only have 2% holding in the company and cannot receive benefits that are tax free. (S Corporations: Learn 15 Advantages & Disadvantages, 2019).
Limited Liability Company (LLC) is a company that is sometime miscalled a limited liability corporation, it is also a company that the members are not liable for the company debit.
LLC is a partnership that is formal which requires that they file with the state and it is easy to setup. (Kenton, 2019).
1. The Advantages of Limited Liability Company (LLC) has protection of personal assets, in the eyes of the law a Limited Liability Company is a separated and a distinct entity. Also, an LLC can be elected to be taxed and they have a flexibility of agreement that will allow the profits and losses to be split among the partners the way they want to and in case of death of the owner the company can cease to exist.
2. The Disadvantage is there is a startup cost in starting a Limited Liability Company (LLC) and there is also fee to prepare the documents, and there is a continuous accounting cost and legal fee. In some stated charge the company a fee to keep your Limited Liability Company active. (Auric, 2016).
A 501 (c) (3) is a nonprofit organization that operates under a different set of rules then the other business entity. 501 (c) (3) purpose is to help the community but also make a profit at the same time. The nonprofits are also protected if they are sued or have outstanding debits it does not affect their personal assets. They have fundraising abilities, they don’t have to file income tax, they must file with the state, and they must have at least three directors.
References:
Auric, Mathew. (March 23, 2016). Pros and Cons of an LLC. Auric Law Group LTD.
Retrieved from http://www.ojailawyer.com/pros-and-cons-of-an-llc/
Crowell, John. (2019). What Are the Benefits & Disadvantages of a Corp? LegalZoom.
https://info.legalzoom.com/benefits-disadvantages-c-corp-22998.html
Kenton, Will. (February 01, 2019). Limited Liability Company – LLC. Investopedia Small
Business. Retrieved from https://www.investopedia.com/terms/l/llc.asp
Morrow, Stephanie. (December, 2009). Partnerships: Pros and Cons. LegalZoom.
Retrieved from https://www.legalzoom.com/articles/partnerships-pros-and-cons
S Corporations: Learn 15 Advantages & Disadvantages. (2019). Corporate Direct.
Retrieved from https://www.corporatedirect.com/start-a-business/entity-types/s-
corporation/
Sole Proprietorship. (n. d.). U. S. Small Business Administration. Retrieved from
https://www.sba.gov/content/sole-proprietorship