A. Sole proprietorship A Sole proprietorship is a type of business entity that has only one individual owner.

The whole idea of the word “Sole” is that there are no other partners and the owner has unlimited liability. • Liability: The owner has unlimited liability. He is responsibly for every aspect of the business including debts, capital, and legal issues. • Income taxes: The owner pays self employment tax on the revenue the business earns. • Control: There is one owner and the owner has total control and authority. • Profit retention: Because there is only one owner , the owner receives revenues from the business . • Convenience or burden: A second disadvantage of conducting business as a sole proprietorship is that you may pay higher income taxes. I am sure you remember that as a sole proprietor you report your business income on your personal tax return (Line 12 on the 1040 again). While you do avoid double tax this way, if as a single person your total adjusted gross income exceeds $115,000, or as a married person filing jointly your adjusted gross income exceeds $140,000 , you may pay income tax at the highest rate. By incorporating your business, you may 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 an unincorporated company with the following major features: Created by agreement, proof of existence and estoppels, formed by two or more persons, and the owners are all personally liable for any legal actions and debts the company may face“ (General Partnership, 2009). Furthermore the partners share equally in both responsibility and liability. • Liability: All partners in business are jointly and personally liable for all aspects of the business. • Income taxes: Just like a sole proprietorship , a partnership has one level of taxation. A partnership is not a tax-paying entity but a tax reporting entity. • Longevity or continuity of the organization: There are three forms of partnerships that can affect how the company survives. These forms are Joint Tenancy, Tenants in Common, and Tenancy by entirety. • Control: Partners share in control and each have equal voting rights on decisions. • Profit retention: Partners normally share in gross profits among themselves

• Convenience or burden: One common problem with partnerships are squeeze-outs.

C. Limited partnership Limited partnership consists of two or more partners with at least one being a general partner and one being a limited partner. While a general partner in an LP has unlimited personal liability , a limited partner liability is limited to the amount of his or her investment (Limited partnership, 2010). • Liability: A general partner has unlimited liability , but a limited partners liability is limited to his or her investment. • Income taxes: The amount of taxes to be paid can be split among the partners. Most likely if certain requirements aren’t met an LP can be taxed as a corporation. • Control: Limited partnership’s normally has little control and no managerial control authority. • Profit retention: Limited partnership’s can be likened to a shareholder in a corporation. They are paid a return on investment, similar to dividends. • Location: There are regional variations in laws concerning a limited partnership. • Convenience or burden: Limited partnerships don’t have the stress of

company management.

D. C-corporation A C corporation (or C corp.) is a corporation in the United States that, for Federal income tax purposes, is taxed under 26 U.S.C. § 11 and Subchapter C (26 U.S.C. § 301 et seq.) of Chapter 1 of the Internal Revenue Code. Most major companies (and many smaller companies) are treated as C corporations for Federal income tax purposes. A Corporation must file under Subchapter C if it fails to meet even one requirement to qualify as an S Corporation. (C Corporation, 2010)

• Liability: Shareholders are not typically held liable for the company's losses or debts. Their investment in a company is their only financial risk. • Income taxes: Taxed at corporate rate and possible double taxation: Dividends are taxed at the individual level if distributed to shareholders. IRS Tax Form 1120 • Longevity or continuity of the organization: Perpetual: can extend past death or withdrawal of shareholders. • Control: Shareholders elect directors who manage business activities. • Profit retention: Dividends are paid to shareholders. • Convenience or burden: C- Corporations must have annual meetings, Board of Directors meetings, corporate minutes, and

stockholder meetings.

E. S-corporation An S corporation, for United States federal income tax purposes, is a corporation that makes a valid election to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code. In general, S Corporations do not pay any income taxes. Instead, the corporation's income or losses are divided among and passed through to its shareholders. The shareholders must then report the income or loss on their own individual income tax returns.

• Liability: Shareholders are not typically held liable for the company's losses or debts. Their investment in a company is their only financial risk. • Income taxes: No tax at the entity level. Income passed through to the shareholders. • Longevity or continuity of the organization: Perpetual: can extend past death or withdrawal of shareholders. • Control: Shareholders elect directors who manage business activities. • Profit retention: Dividends are paid to shareholders and are not subject to employment taxation.

• Convenience or burden: C- Corporations must have annual meetings, Board of Directors meetings, corporate minutes, and stockholder meetings.

F. Limited Liability Company A Limited Liability Company is a legal form of business company that provides limited liability to its owners. Often incorrectly called a "limited liability corporation" (instead of company), it is a hybrid business entity having certain characteristics of both a corporation and a partnership or sole proprietorship (depending on how many owners there are). An LLC, although a business entity, is a type of unincorporated association and is not a corporation (Limited Liability Company,2010) .

• Liability: Members are not held liable for the company's losses or debts. • Income taxes: No tax at the corporate level. Income passed through to members. Salary subject to self employment tax. • Longevity or continuity of the organization: Perpetual, unless state requires fixed amount of time.

• Control: Members can set up structure as they choose. • Profit retention: Income passed through to members , however distribution on profits were decided. • Convenience or burden: The convenience for having an LLC is that no partner or owners has any personal liability.

---------------------------------------------------------------------------------------------------------Reference List

C Corporation (2010) Wikipedia.com. Retrieved from http://en.wikipedia.org/wiki/C_corporation

Doing Business As A Sole Proprietor (1997) . Poznak Law Firm Ltd. Retrieved from http://www.poznaklaw.com/articles/solep.htm

General Partnership (2009). Wikipedia.com. Retrieved from http://en.wikipedia.org/wiki/General_partnership

Limited Liability Company (2010) Wikipedia.com Retrieved from http://en.wikipedia.org/wiki/Limited_liability_company

Limited Partnership (2007) . QuickMBA.com. Retrieved from http://www.quickmba.com/law/partnership/limited/

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