ACC111 Lesson 1 Essay

In both business and accounting there are multiple types of entities (different types of business) that exist. The types of business entities that exist are a sole proprietorship, partnership, corporation and a limited liability company. Depending on the type of entity that is established, will determine how an accountant will analyze the transactions of that business, and determine how they are inputted. The type of business can also have their own advantages and disadvantages finically on a business.
A sole proprietorship is defined as a business with a single owner and is considered the simplest way to start a business. It is a business in which there is no distinction between both the business and the owner. The business owner is entitled to not just all the profits, but he or she is also held responsible for all your business and all aspects of the business. According to SBA.gov “because you and your business are one and the same, the business itself is not taxed separately-the sole proprietorship income is your income (n.d.)”. To some the tax advantages alone from a sole proprietorship is considered a huge advantage for a business owner. Some of the other considered advantages of this type of business entity is that is easy and cheap to start up, and you are in complete control of your company. A sole proprietorship also has some big draw backs. It can be hard to raise money for your business (no stock options), and unlimited personal liability, meaning that there is literally no legal distinction between you and your business. This can be a huge, if you ever find yourself in a lawsuit.
According to Entrepreneur the definition of a partnership is “a legal form of business operation between two or more individuals who share management and profits (n.d.)”. The federal government recognizes three types of partnerships, general partnership, limited partnership and joint ventures. Legally partnerships are also great from a legal stand point. In this