Small Business Idea Paper
Small Business Idea Paper
University Of Phoenix
ACC/561
Verbena Williams
Small Business Idea Paper
Starting a business can be an exciting, yet overwhelming experience. Before you can launch your business venture, deciding the form of business organization will be one of the first things necessary. Some of these business organizations include; sole proprietors, corporations, and partnerships. With choosing which organization to go with one must consider consequences in lieu of legal issues, taxes, financial statements, and accounting practices. A new business venture will be summarized along with the business organization type and related consequences regarding different business types.
Types of legal business entities
Sole Proprietorship This type of organization is one of the most common for small businesses. This type is controlled by one person for all of the company’s needs—management and operations. This business type is unincorporated and one of the easiest and least expensive to start. Other advantages of a sole proprietorship are that all income generated goes directly to the owner to keep or reinvest, and the business is easy to dissolve, if necessary. Some disadvantages are that the owner is responsible for any incurred debt against the business and personal assets are at risk. Also, raising funds is difficult and are often limited to personal funds or consumer loans. Tax implications. Sole proprietors pay taxes on his or her personal income taxes. The business itself is not taxed separately. The IRS calls this “pass-through” taxation because business profits pass through the business to be taxed on the personal tax return (IRS, n.d.). An individual will be taxed on all profits of the business—total income minus expenses—regardless of how much money is withdrawn from the business. Legal implications. Sole proprietors are his or her business. They are one in the same. If the business suffers a financial loss, goes out of business
University Of Phoenix
ACC/561
Verbena Williams
Small Business Idea Paper
Starting a business can be an exciting, yet overwhelming experience. Before you can launch your business venture, deciding the form of business organization will be one of the first things necessary. Some of these business organizations include; sole proprietors, corporations, and partnerships. With choosing which organization to go with one must consider consequences in lieu of legal issues, taxes, financial statements, and accounting practices. A new business venture will be summarized along with the business organization type and related consequences regarding different business types.
Types of legal business entities
Sole Proprietorship This type of organization is one of the most common for small businesses. This type is controlled by one person for all of the company’s needs—management and operations. This business type is unincorporated and one of the easiest and least expensive to start. Other advantages of a sole proprietorship are that all income generated goes directly to the owner to keep or reinvest, and the business is easy to dissolve, if necessary. Some disadvantages are that the owner is responsible for any incurred debt against the business and personal assets are at risk. Also, raising funds is difficult and are often limited to personal funds or consumer loans. Tax implications. Sole proprietors pay taxes on his or her personal income taxes. The business itself is not taxed separately. The IRS calls this “pass-through” taxation because business profits pass through the business to be taxed on the personal tax return (IRS, n.d.). An individual will be taxed on all profits of the business—total income minus expenses—regardless of how much money is withdrawn from the business. Legal implications. Sole proprietors are his or her business. They are one in the same. If the business suffers a financial loss, goes out of business
References: IRS (n.d.) Publication 541 Maint Content. Retrieved November 5, 2011, from http://www.irs.gov/publications/p541/ar02.html#en_US_publink1000104201 Partnership Accounting (n.d.). Retrieved November 5, 2011, from http://www.cliffsnotes.com/study_guide/Partnership-Accounting.topicArticleId-21248,articleId-21186.html Partnership Accounting (n.d.). Retrieved Novemeber 6, 2011, from http://en.wikipedia.org/wiki/Partnership_accounting University of Phoenix. (2011). Week One Supplement: Wiley Plus Vide Tutorial: Read, Study, & Practice Tab, Acct/561—Accounting course website l ‘;;