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Business Law

Business Law

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Published by william404

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Published by: william404 on Apr 17, 2012
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07/20/2013

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A. Sole proprietorship
A Sole proprietorship is a type of business entity that has only oneindividual owner. The whole idea of the word “Sole” is that there are noother partners and the owner has unlimited liability.
• Liability:
 The owner has unlimited liability. He is responsibly for everyaspect of the business including debts, capital, and legal issues.
• Income taxes:
 The owner pays self employment tax on the revenuethe business earns.
• Control:
 There is one owner and the owner has total control andauthority.
• Profit retention:
Because there is only one owner , the ownerreceives revenues from the business .
• Convenience or burden:
A second disadvantage of conductingbusiness as a sole proprietorship is that you may pay higher incometaxes. I am sure you remember that as a sole proprietor you report yourbusiness income on your personal tax return (Line 12 on the 1040again). While you do avoid double tax this way, if as a single person yourtotal adjusted gross income exceeds $115,000, or as a married personfiling jointly your adjusted gross income exceeds $140,000 , you maypay income tax at the highest rate. By incorporating your business, youmay be able to reduce your tax rate (
Doing Business As A Sole
 
Proprietor 
, 2010)
B. General partnership
A general partnership refers to “an association of persons or anunincorporated company with the following major features: Created byagreement, proof of existence and estoppels, formed by two or morepersons, and the owners are all personally liable for any legal actionsand debts the company may face“ (
General Partnership
, 2009). Furthermorethe partners share equally in both responsibility and liability.
• Liability:
All partners in business are jointly and personally liable forall aspects of the business.
• Income taxes:
Just like a sole proprietorship , a partnership has onelevel of taxation. A partnership is not a tax-paying entity but a taxreporting entity.
• Longevity or continuity of the organization:
 There are threeforms of partnerships that can affect how the company survives. Theseforms are Joint Tenancy, Tenants in Common, and Tenancy by entirety.
• Control:
Partners share in control and each have equal voting rightson decisions.
• Profit retention:
Partners normally share in gross profits amongthemselves
 
• Convenience or burden:
One common problem with partnershipsare squeeze-outs.
C. Limited partnership
Limited partnership consists of two or more partners with at least onebeing a general partner and one being a limited partner. While a generalpartner in an LP has unlimited personal liability , a limited partnerliability is limited to the amount of his or her investment (Limitedpartnership, 2010).• Liability: A general partner has unlimited liability , but a limitedpartners liability is limited to his or her investment.• Income taxes: The amount of taxes to be paid can be split among thepartners. Most likely if certain requirements aren’t met an LP can betaxed as a corporation.• Control: Limited partnership’s normally has little control and nomanagerial control authority.• Profit retention: Limited partnership’s can be likened to a shareholderin a corporation. They are paid a return on investment, similar todividends.• Location: There are regional variations in laws concerning a limitedpartnership.• Convenience or burden: Limited partnerships don’t have the stress of 

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