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The company should operate as a C corporation. There are a few reasons for this choice of business structure. As a sole proprietorship, Bob faces a number of challenges, including the reality that his legal downside includes his personal property. Maintaining his business as a sole proprietorship will also have tax and timing implications for when he wants to pass the business on to his daughter. Therefore, the sole proprietorship should be a non-starter. He has the option of S and C corporations, and there are specific implications for each of these.
An S corporation elects to “pass corporate income, losses, deductions and credits through to their shareholders for federal tax purposes” (IRS.gov, 2020). The company is eligible to be an S corporation, as it meets the criteria that the IRS has laid out. One of the risks, however, is in the transfer of ownership to Mandy, in particular if she would be expected to cover any losses. While the business might be stable and profitable for many years, one never knows when a pandemic will render the business unprofitable. Losses in the event of legal action would be worse, but an S corporation...
However, she would have to pay taxes on her share of the profits of the dealership, even if she herself earned no cash and the dealership reinvested those profits back into the business. Thus, Mandy would find herself with a tax bill that she might not be able to pay.
According to the IRS, a C corporation is a separate tax-paying entity. This structure would mean that the company pays taxes directly to the IRS, meaning that Mandy would not have a tax burden based on her ownership of the dealership. The tax rate might also be lower. Bob could also transfer the business to Mandy at a time that brings about the lowest combined tax burden on the transfer – Bob would face a capital gain on an S corporation and so there could be significant timing implications for the transfer. Bob definitely wants to have a succession plan for his retirement, and if Mandy is part of that, this is fine, but he should also be aware that the succession plan is a holistic thing, not just a transfer of ownership to the next generation, especially at an age when the daughter’s interest in running that business…
Business Entities, Laws, And Regulations This paper will focus on the challenges faced by one start-up businesses and an established company with labor issues. For the start-up, a birth clinic, a case needs to be made for the type of business entity they should each use. The established company is a construction company whose business entity must be identified and employment law pertaining to the scenario will be discussed. For each
Business Construction Scenario Business entities vary from countries to countries since the formation of a business is controlled by the various legal systems instituted in those countries. There are many types of business entities, and this is where we find the likes of sole-proprietorship, partnership, cooperatives, corporations and limited liability Company among others (Waddell, 2008). A business may be categorized in any of these entities just by the composition of its
However, as Nick is unqualified for the position, the medical question is moot -- Nick would not be hired because he has no experience. Michelle has some past experience and would be under consideration. Under the terms of the Pregnancy Discrimination Act prohibits discrimination on the basis of pregnancy in employment. The Act does not explicitly prohibit Mei-Lin from inquiring about the pregnancy, but it is recommended that she refrain
S corporations must be domestic in nature, issue only one kind of stock, and have less than a hundred shareholders: given that Frank only has aspirations to have a U.S.-based business, this entity type would seem ideal, although he might need some legal help to file as an S Corporation. Professional practice: An LLC, or limited liability corporation, is the most popular type of entity structure for professional groups such
Strategic Planning in IT IT Impact on Service Industry Performance Cooperative Competitive Competitive Advantage Implementation of IT Innovations 1992 U.S. VALUE-ADDED AND EMPLOYMENT BY INDUSTRY AVERAGE ANNUAL GROWTH IN GDP PER HOUR, MAJOR SECTORS OF THE U.S. ECONOMY Management TASKS IN BUREAUCRACY VS ADHOCRACY ORGANIZATIONS This paper addresses the following problem statement: "Without information technology (IT), a business will not be able to compete globally in any industry, nor in any market it wants to enter. It will
Laws Governing Business Entities Laws Governing Business Organizations Every business organization in a developed market is governed by laws, which are rather closely monitored to ensure the good fairing of the organization in the business market. Such laws provide for the standard form of the generally established legal entities in the worldwide economy. Such defined entities include, partnerships (general and limited), Limited Liability Company, cooperatives among others. This document outlines such laws