Question

​In preparation for your final assignment you will be preparing the documents necessary to set up a corporation and will also discussing the advantages and disadvantages of the three most common types of business entities.

​The first step is to go to the Virginia State Corporation commission website and download the applicable forms for creation of a corporation in Virginia. Two then to fill out those forms as if you were preparing an actual Corporation. These forms will be submitted to Blackboard as an assignment.

​The three basic types of business entities or corporations, sole proprietorships and partnerships. They were all discussed in chapters 21 and 22 in the textbook and they were discussed in class. The assignment is to write a five-paragraph essay describing each of these types of business entities and their strengths and their weaknesses. The next step will be to determine which type of these business entities would be best to use for the business that one going to set up as your final project. This should be submitted to Blackboard as a Word document.

Answer 1

Step1 & 2 includes filling the form for creation of corporate from virginia state corporation commission website

step 3 disscussion on 3 basic types of entities Sole proprietorship,Partnership ,Corporate

1)Sole proprietorship- A sole proprietorship is the simplest business structure in which one person is the owner and operator of the business. This sole proprietor is responsible for all aspects of the business and reaps all profits of the business.

Advantages of sole proprietorship
• Beginning a sole proprietor ship is easy.
• It is cheap to start a sole proprietorship. Where other business structures have increased fees and filings to open for business, sole proprietorships tend to be affordable models to start and maintain.
• There are some tax benefits for a sole proprietorship. Instead of the business having to file its own tax return, sole proprietors claim businesses gains and losses on their own individual tax return.

DisAdvantage of sole proprietorship

• Owners are liable. If business debts become overwhelming, the individual owner’s finances will be impacted. When a sole proprietorship fails to pay its debts, the owner’s home, savings, and other individual assets can be taken to satisfy those debts.
• Self-employment taxes apply to sole proprietorships. Owners must pay self-employment taxes on the business income.
•Business continuity ends with the death or departure of the owner
•Raising capital is difficult. Initial funds of the business are generated by the owner and raising funds for the business can be hard since they cannot issue stocks or other investment income. Loans may also be difficult if the owner does not have enough credit to secure additional money.

2) Partnership- where two or more people wish to come to together to form a business is partnership.Perhaps they have a common business idea that they wish to put to the test or have realised that their skills and talents compliment each others in such a way that they might make a good business team.

Advantages of a partnership

•your business is easy to establish and start-up costs are low
•more capital is available for the business
•high-calibre employees can be made partners
•there is opportunity for income splitting, an advantage of particular importance due to resultant tax savings
partners’ business affairs are private
•there is limited external regulation
•it’s easy to change your legal structure later if circumstances change.
Disadvantages of a partnership

•the liability of the partners for the debts of the business is unlimited
•each partner is ‘jointly and severally’ liable for the partnership’s debts; that is, each partner is liable for their share of the partnership debts as well as being liable for all the debts
•there is a risk of disagreements and friction among partners and management

corporation: A corporation is a business organization that is distinct from its owners. Shareholders are the owners of a corporation. Shareholders, however, do not run the corporation. They appoint the Board of Directors who oversee the corporation’s activities

Advantages of Corporation
•Owners have limited liability. The owners assets are protected from the debts and liabilities of the corporation. •Shareholders are not held liable for business losses.
•Easier to raise capital. It is easier to attract capital with the sale of stocks and bonds. A corporation can have an unlimited number of investors.
•Easy to transfer ownership. Corporations have perpetual lifetimes. The entity continues to exist beyond the deaths of the owners.
Disadvantages of Corporation
•Double taxation of corporation profits. The corporation pays federal and state taxes on its profits. When dividends are paid to shareholders, they are treated as income and taxed again.
•Forming a corporation costs more. Attorneys charge more to form a corporation.
States have higher fees. States charge annual franchise fees for corporations.
•More state and federal regulations and oversight.

step 4

Now after understanding advantages and disadvantages Of various business entities it is upon you to select the entity you preferably want to set up as your final project