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Business OrganizationWhen determining which form of business organization to adopt for one's business, it is important to consider a number of variables before making a decision. These factors can include: the level of control the owner wishes to have, the structure of the company, the company's level of vulnerability to lawsuit, expectations of profit/loss, and whether there is a need for re-investment of capital back into the company. These considerations can greatly impact the form of organization one chooses. For the case of West Casing, these factors when addressed point to an S Corporation being the best option for Steve West and his 6-man crew. This paper will explain why and S Corp would work for West.
The chief characteristics of the S Corporation are that the business is set up as a separate entity (so in the unfortunate event that there is a casing leak and the company is sued, Steve West himself is not liable but rather the company). The owner is considered a shareholder, as in a regular corporation, and can be hired as a regular worker. The S Corp stipulates that if there is a profit, the shareholder must be paid a...
For tax purposes, this could actually be beneficial for West once the business does become profitable, because his own personal taxes will be less due to the wage that he receives. For his company, West would be the primary shareholder of the company, and though he is not anticipating earning a profit in the first couple of years, when the business does begin to turn a profit, West can pay himself a wage from the company and thus being personally taxed based on profits alone. The S Corp, like the LLC, allows the owner to avoid paying both corporate and personal taxes. The So Corp. would be beneficial for West because in addition, West would receive a salary from the business as well as personal dividends from profits (Dahl, 2015).
The S Corp would also be much better than starting a sole proprietorship because the latter would leave West exposed to lawsuit: with the corporation, he is better protected in case of accident. Even though West's company is currently small, he does plan to expand in the coming years -- and with expansion, the assumption is that profit will follow. Also, with expansion, risks go up -- and…
Sole Proprietorship Before Referencing Family business structures In businesses that involve numerous members of the same family, the preferred business choice of conduct is the partnership. What advantages may occur for the family members by conducting business in this form? One of the advantages of constructing a joint proprietorship or partnership for a family business is that unlike a sole proprietorship, liability is divided equally between all family members.In other words, if the
Business Types L. Jones Sole Proprietorships, Corporations, and Partnerships: Just what are they? One of the first decisions any individual or group of individuals must consider when starting or joining a business, is the legal form the entity will take. In the United States, as in many other countries around the world, the three main forms of business structures are the sole proprietorship, the corporation, and the partnership. Further, each type carries with it
Legal Terms Sole proprietorship- In a sole proprietorship, one person owns all of the business assets and is the sole decision maker. The sole proprietor has unlimited personal liability for business debts, and all profits and losses pass through the business to the owner (Bouchoux, 2007). General partnership- In a general partnership two or more people co-own all business assets and share decision-making power. Each partner has unlimited personal liability for
, 2010). Where there is the sale of shares, there is also a great potential that the existing owners will have little control over who the shares are subsequently sold to, especially in a quoted company. The firm will also be subject to the Sarbanes-Oxley Act (SOX), which was also known as the "Company Accounting Reform and Investor Protection Act," in the Senate (Libby et al., 2010). 3. Decision for the Business As
Business Limited Liability Corporation and Partnership Paper A limited liability company, normally called an LLC, is a business arrangement that merge the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation (Limited Liability Company (LLC) FAQ, 2012). The federal government does not distinguish an LLC as a classification for federal tax purposes. LLC's are well-liked because, comparable to a corporation, owners have limited personal liability for
These elements are important, because they are showing how these kinds of entities are ideal for a group of individuals that will be directly involved in the business. As, they want to maintain operational control; but they want some kind of: division of labor, responsibilities and financial contributions. ("Incorporation") (Hernandez) This is similar to a proprietorship in that it is easy to establish and there are less regulations. However,