Question

In: Accounting

What part or parts of the United States government structure do you see are most important...

What part or parts of the United States government structure do you see are most important for business owners and their accountants to understand?

Solutions

Expert Solution

There are a few different structures for your business:-

  • Sole Proprietorship
  • Partnership
  • Corporation
  • Limited Liability Company

Business owners and their accountants must understand these Legal Business Structures, because each business form comes with different tax consequences, you will want to make your selection wisely and choose the structure that most closely matches your business's needs. The advantages and disadvantages of each Business Form are explained herewith. Business owners and their accountants must consider these while selecting structure of your business.

The Sole Proprietorship
The sole proprietorship is a popular business form due to its simplicity, ease of setup, and nominal cost.

Advantages of the Sole Proprietorship

  • Owners can establish a sole proprietorship instantly, easily, and inexpensively.
  • Sole proprietorships carry little ongoing formalities.
  • A sole proprietor need not pay unemployment tax on himself or herself (although he or she must pay unemployment tax on employees).
  • Owners may freely mix business and personal assets.

Disadvantages of the Sole Proprietorship

  • Owners are subject to unlimited personal liability for the debts, losses, and liabilities of the business.
  • Owners cannot raise capital by selling an interest in the business.

The Partnership
A partnership is a business form created automatically when two or more persons engage in a business enterprise for profit.

Advantages of the Partnership

  • Owners can start partnerships relatively easily and inexpensively.
  • Partnerships do not require annual meetings and require few ongoing formalities.
  • Partnerships offer favorable taxation to most smaller businesses.
  • Partnerships often do not have to pay minimum taxes that are required of LLCs and corporations.

Disadvantages of the Partnership

  • All owners are subject to unlimited personal liability for the debts, losses, and liabilities of the business (except in the cases of limited partnerships and limited liability partnerships).
  • Individual partners bear responsibility for the actions of other partners.
  • Poorly organized partnerships and oral partnerships can lead to disputes among owners.

The Corporation

A corporation is a body is a legal person in the eyes of the law. It can bring lawsuits, can buy and sell property, contract, be taxed, and even commit crimes on its name. A corporation has perpetual life. When shareholders pass on or leave a corporation, they can transfer their shares to others who can continue a corporation's business. A corporation is owned by its shareholders, managed by its board of directors, and in most cases operated by its officers.


Advantages of the Corporation

  • Owners are protected from personal liability for company debts and obligations.
  • Corporations are the best vehicle for eventual public companies.
  • Corporations can more easily raise capital through the sale of securities.
  • Corporations can easily transfer ownership through the transfer of securities.
  • Corporations can have an unlimited life.
  • Corporations can create tax benefits under certain circumstances.

Disadvantages of the Corporation

  • Corporations require annual meetings and require owners and directors to observe certain formalities.
  • Corporations are more expensive to set up than partnerships and sole proprietorships.
  • Corporations require annual fees and periodic filings with the state.

The Limited Liability Company (LLC)

The LLC is often described as a hybrid business form. It combines the liability protection of a corporation with the tax treatment and ease of administration of a partnership. As the name suggests, it offers liability protection to its owners for company debts and liabilities.

Advantages of the LLC

  • LLCs do not require annual meetings and require few ongoing formalities.
  • Owners are protected from personal liability for company debts and obligations.
  • LLCs enjoy partnership benefits also, which is favorable to many small businesses.

Disadvantages of the LLC

  • An LLC is not an appropriate vehicle for businesses seeking to become public eventually, or to raise money in the capital markets.
  • LLCs are more expensive to set up than partnerships.
  • LLCs usually requires annual fees and periodic filings with the state.
  • Some states do not allow the organization of LLCs for certain professional vocations.

Related Solutions

What type of government does the United States have? Is it the most democratic government possible?...
What type of government does the United States have? Is it the most democratic government possible? Do citizens make the decisions of government or do they merely influence them?
Looking ahead, what do you see as the future level of crime inthe United States?...
Looking ahead, what do you see as the future level of crime in the United States? What specific changes do you expect to see in the strategies and policies by which our society responds to crime? What changes would you like to see toward the goal of improving U.S. society?
1)What do you think was more important for manufacturing growth in the United States in the...
1)What do you think was more important for manufacturing growth in the United States in the early period: supply or demand factors, or a mix of both? 2)Should U.S. public policy aim to raise population growth (through either a higher birth rate or increased immigration) back to the high population growth rates seen earlier in U.S. history? Why or why not? 3)Do you think the Homestead Act was optimal as formulated? Or should it have been expanded or shrunk or...
Discuss the strengths and weaknesses of the structure of government in the United States of America....
Discuss the strengths and weaknesses of the structure of government in the United States of America. Please provide your understanding of the three branch of government as well as your views on whether they conflict with States rights.
Part C. What are the most important things that you can do for a venture in...
Part C. What are the most important things that you can do for a venture in order to get the odds of success in your favor? Explain. (10 points)
What was the first (and arguably most important) act of antitrust litigation in the United States?
Question 253.125 pts What was the first (and arguably most important) act of antitrust litigation in the United States? Monopolization and trust formation act Sherman Act Clayton Act Interstate Commerce Commission Act Flag this Question Question 263.125 pts You are evaluating the possible merger of Honda and Philip Morris. What kind of merger is this? Horizontal Conglomerate None of the above Vertical Flag this Question Question 273.125 pts   When deregulation was initially being discussed, what was one of the most...
The textbook states that the cash budget is one of the most important parts of the...
The textbook states that the cash budget is one of the most important parts of the master budget. There are several reasons listed as to why a cash budget is considered to be this important; I would like your thoughts as to why you consider the cash budget to be this important. How does the granting of credit to customers (and to your company from suppliers) affect your answer? What happens when you face a cash shortage? Is there something...
What do you see as the most important environmental or occupational concern in public health today...
What do you see as the most important environmental or occupational concern in public health today and why? Support your answer with a documented RELIABLE reference from the Internet. Provide the URL for your source at the end of your discussion.
In your opinion, how do you see healthcare in the United States changing in the future?...
In your opinion, how do you see healthcare in the United States changing in the future? Please explain your answer. Meet the 200 word count
What type of government do we have in the United States? Why is it effective? What...
What type of government do we have in the United States? Why is it effective? What are some of the theories of American democracy and fundamental American values?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT