Entity Selection Exercise
Idea or vision for the business:
Joe's Landscaping and Tree Trimming -- Equipment rentals, too, on request! Make your land look beautiful as nature intended, with a little help of the hands of Joe!
Identify legal and regulatory issues to be considered in creating or modifying this business
At present, Joe operates under the legal and tax status of a sole proprietorship. A sole proprietorship is an unincorporated business owned by one individual, in this case, Joe. A sole proprietorship is one of the most popular forms of business entities because legally and for tax purposes, is the simplest or least bureaucratic form of business organization to start and maintain. The business has no existence apart from the owner and is particularly popular with singular business entities, or local entities, such as Joe's business, which is limited to a fixed area, does not seem ripe for franchising, and has a steady base of consumers for the same service or product. ("Sole Proprietorship," Nolo, 2005)
The fact that Joe is branching into equipment rental, however, indicates that the business may present some small, alternate venues or resources for Joe to profit from as a proprietor. Regardless, the downside towards Joe's remaining a sole proprietor is that he can be held personally liable for any business-related obligation. This means that if the business of Joe can't pay one of his suppliers, defaults on a debt, or loses a lawsuit, the creditor can legally come after the owner's house or other possessions. ("Sole Proprietorship," Nolo, 2005)
The liabilities at present...
If Joe's clients do not pay him for the services of his grounds keeping or equipment rental, Joe must still undertake the risks personally, as an individual for such nonpayment. He is 'one' with the business for all assets owned, and it is his responsibility to seek restitution. He has the responsibility for reporting all of the business' income and the expenses of the business on his own tax return. (IRS, 2005)
Joe is also legally responsible for paying his employee's employment taxes, including the Social security and Medicare taxes and income tax withholding of his employees, their Federal unemployment (FUTA) tax, and depositing employment taxes, as well as his own income, self-employment, estimated, and excise taxes. Estimated taxes for Joe's income from his business must be paid personally on a quarterly, rather than an annual basis.
The main difference between reporting income from Joe's sole proprietorship and reporting wages from a job is that Joe must list his business's profits and losses on "Schedule C (Profit or Loss from a Business)," to the IRS along with his personal income Tax Form 1040. ("How Sole Proprietorships are Taxed," Nolo, 2005)
How you would select professionals to rely upon for business advice, and whom would you choose?
The issue of seasonal or day laborers, of dubious green card status, could come into issue for Joe, in the near future. A good accountant is necessary for the business if tax-related legal issues arise as well. Joe should also…
