Question

What is the legal business structure of the company (sole proprietorship, partnership, corporation, LLC/LLP, etc.)? Why was this legal business structure chosen?

Answer 1

The legal business structure are

1. Sole Proprietorship :- It is the simplest structure which involves one individual who owns and operate the enterprise.

The tax aspects are appealing because the expences and income from the business are included in personal incone tax return i.e in (form 1040). the profit and loss are recorded on a form called Schedule C, the bottom line amount from Schedule C is then can be transfered as your personal tax return.

Benifits:- With the sole proprietorship the business earnings are taxed only once. and also you will have complete control over the business. For this reason sole proprietorship is choosen.

2. Partnership :- If the business is owned and operated by several individual then this is a structure of business as a partnership. It is of 2 types.

General partnership:- The partners manage the company and asume responsibility for the partnership's debts and other obligation.

Limited partnership:- It has both general and limited partners. Here the limited partners serve as the investers only. They have no control over the company and are not subject to the same liabilities as general partners.

Benifits:- A partnership does not pay tax on its income but passes through any profits or losses to the individual partners. Also partnership is more expensive then the sole properitorship.

3. Corporation :- A corporation is an independent legal entity, that separate from its owners and it requires complying with more regulation and tax requirements.

Benifits:- The business owner who decided to incorporate is the liability protection they recieve. A corporation's debt is not considered of its owners so if we organise our business then we are not putting our personal asset at risk. It also helps in raising money by selling stock.

4.LLC/LLP :- LLC( Limited Liability Company)s ware created to provide business owners with the liability prorection that corporations enjoy without the double taxsation. Income and losses pass through to the owners and are included on there personal tax return. There is no limitation in the LLC share holders. Also the member or owner of the LLC allowed to full participatory role in the business operation.

LLP( Limited Liability Partnership) in this the general partners have limited liability. Like the partners are liable for their own malpractice and not that of their partners.

For these resons and benifits these legal business structures are choosen.