Question

In: Accounting

What are the three types of company legal structures discussed in the class?

What are the three types of company legal structures discussed in the class?

Solutions

Expert Solution

Three Types of Company Legal Structures:

1.Sole Proprietorship

2.Corporation

3.Limited Liability Company(LLC)

1. Sole Proprietorship:

Sole Proprietorship is a Business which can be Controlled and Managed by an Individual Person on his behalf; It is very simplest form of doing business compared to other form of Legal Structures

It can be controlled and Managed by single Person including the tasks of..,

Maintaining The Books of Accounts and Bringing the Funds to establishment of Sole Proprietorship, and Planning, Directing, Organising, Decision making   by self while conducting his Business.

An Advantage of this Legal Structure is You Can claim business losses from other Personal income sources while Filling and Paying the Taxes.

The Person is solely responsible for all the Liabilities.

The Problem of This Type of legal Structure is when Liabilities Occurred then If he is unable to pay from the business then he needs to pay from his Personal Assets ., as Legal Structures establishes the personal Liability for All liabilities which may be taken on behalf of the business.

2.Corporation:

The Corporation is nothing but formed through Number of Small Investors but the Corporation is managed by Majority of Share holders but not all shares holders

The Body of Corporation first Procure the Funds from the small Investors then Use such funds for their Objectives. The Objective may be for any business.

The biggest Advantage here is “Easy to raise Funds” , which may be by direct from Investors or Loans from Banks and Financial Institutions and From Capital markets too..,,

The Problem here is Investor not directly take the decisions, Though they are owners of business

Disadvantage is Everything should be documented which is very expensive sometimes as records involves each and every activity.

3.Limited Liability Company(LLC):

It is a type of Legal Structure is mid form of sole Proprietorship and Corporation

They are few members or Investors called Partners, Everyone has their own legal right

The biggest Advantage is that Liability is Limited and less maintenance of Books of accounts compared to Corporation and Any fraud Occur in the LLC then The partner is responsible only those acts which are delegated or task done or Interfere.


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