Fin 571 Business Structures
Business Structures
Krista Harvell
FINANCE 571
July 01, 2013
Mario Ducret
Business Structures
There are four main forms of business structures. The structures of business differentiate based on liability, tax implications, and what type of business is being evaluated when determining what structure to use. This paper will cover the advantages and disadvantages within the four types of business structures; Limited Liability Corporations, Corporations, Partnerships, and Sole Proprietorships.
Corporations
A corporation is a standalone entity. There are two types of corporations, general or S Corp. Advantages of corporations consist of limited liability, capital through stock sales, attractive to employees, and receiving corporate tax treatment. S Corps, in addition to limited liability, have tax savings as the owners are taxed individually. A disadvantage of an S Corp is the limited growth as S Corps may not have greater than 100 shareholders. General corporations file taxes separately from his or her owners while S Corporations do not. Disadvantages of a corporation are time and money, large amounts of recordkeeping, and subject to double taxation. Double taxation is taxation on the corporate level and again on a member’s personal level (“U.S. Small Business Administration,” 2013). Corporations are generally suited for large business organizations.
Limited Liability Corporation (LLC)
A Limited Liability Corporation (LLC) is a company combining the benefits of a partnership and a corporation. A LLC acts as its own entity with the limited liability, but also has the tax savings as if it were a sole proprietorship (“The Advantages of an LLC Company”, 2013). Advantages of an LLC are limited liability, require less paperwork, and have the ability to profit share. Disadvantages of an LLC are limited life and members are subject to self-employment taxes. Members of an LLC are considered self-employed; therefore the individuals file taxes through personal
Krista Harvell
FINANCE 571
July 01, 2013
Mario Ducret
Business Structures
There are four main forms of business structures. The structures of business differentiate based on liability, tax implications, and what type of business is being evaluated when determining what structure to use. This paper will cover the advantages and disadvantages within the four types of business structures; Limited Liability Corporations, Corporations, Partnerships, and Sole Proprietorships.
Corporations
A corporation is a standalone entity. There are two types of corporations, general or S Corp. Advantages of corporations consist of limited liability, capital through stock sales, attractive to employees, and receiving corporate tax treatment. S Corps, in addition to limited liability, have tax savings as the owners are taxed individually. A disadvantage of an S Corp is the limited growth as S Corps may not have greater than 100 shareholders. General corporations file taxes separately from his or her owners while S Corporations do not. Disadvantages of a corporation are time and money, large amounts of recordkeeping, and subject to double taxation. Double taxation is taxation on the corporate level and again on a member’s personal level (“U.S. Small Business Administration,” 2013). Corporations are generally suited for large business organizations.
Limited Liability Corporation (LLC)
A Limited Liability Corporation (LLC) is a company combining the benefits of a partnership and a corporation. A LLC acts as its own entity with the limited liability, but also has the tax savings as if it were a sole proprietorship (“The Advantages of an LLC Company”, 2013). Advantages of an LLC are limited liability, require less paperwork, and have the ability to profit share. Disadvantages of an LLC are limited life and members are subject to self-employment taxes. Members of an LLC are considered self-employed; therefore the individuals file taxes through personal
References: U.S. Small Business Administration. (2013). Retrieved from http://www.sba.gov/ The Advantages of an LLC Company. (2013). Houston Chronicle. Retrieved from http://smallbusiness.chron.com/advantages-llc-company-17263.html