Question

Your sole proprietorship or partnership is growing, and you plan to establish a corporation. Explain the advantages, process for incorporation, and your options for corporate financing.

PLEASE DO NOT COPY AND PASTE OTHER STUDENT WORK THAT WAS SUBMITTED BEFORE.

MINIMUM 200 WORDS.

THANK YOU

Answer 1

In order to establish my sole proprietorship business as a corporation, there are different factors that need to be considered. I will not be solely liable for any debts and losses in the business and the profits of the business will have to be shared. The flexibility of tax preparation will no longer be available. If the business is incorporated, banks will be interested in financing the company as a corporation as it proves to them that I will be committed and dedicated to my business. Incorporation will allow my company to have a lower tax rate than the sole proprietorship. The opportunity of being able to invest in benefits and pension plans is so much easier because the business will be able to compensate for the expense of the benefits as tax-deductible business expenses. If the corporation is liable, the shareholders and the owners are only liable for the amount that they put into the business. Not only for this cause but in case of a lawsuit against the company, the owners’ personal assets are protected because the corporation is a legal entity that is separate from the owners and shareholders.

The process for incorporation requires a filing fee to be paid in order to initiate the business along with a yearly fee while operating the business. It may require to assist from a lawyer and so the cost of hiring one is another additional cost. The process can be long and tedious with finding a name for the business, providing detailed information on the nature of the business, the number of shares, etc., This is to actually provide the state the management and operational functions and structure of the business so as for the laws and guidelines governing incorporation can be implemented, assessed, evaluated, and formed based on the state and federal laws that govern a corporate entity.  

There are a number of options available for corporate financing and it all depends on the capital and resources that the company possesses. It also takes into consideration the company’s background and performance history as they relate to factors such as to the experience and knowledge of the owners, the debt, cash flow, and previous financing. Hence the corporate financing may include various options like personal savings, personal lines of credit, family and friends, vendor financing, IRA financing, etc.,