The following is an explanation of six types of business models. I will explain the advantages and disadvantages, liability, incomes taxes, longevity, control, profit retention. Location and or convenience and burdens. In conclusion, the reader should have a clear understanding and overview of the six types of business forms.
The overall benefits of a sole proprietorship are the flexibility and inexpensive way you can organize and control the company. The owner can create their own policy and procedures as long as they are with the parameters of the law. They receive all income generated by their business and can reinvest as they see fit. Disadvantages
There are a few disadvantages sole owners can experience such as raising funds, use their own personal savings and acquiring debt through business loans. Obtaining and retaining high performing talent can be challenging due to sustainability of employment and medical benefits. Income Taxes
When filing income taxes as a sole proprietor you must use a Schedule C form along with Schedule SE and Form 1040. Taxes are paid on all profits of the business. Any money left in the account at the end of the year has to be reported and taxes must be paid the balance. Recording keeping is crucial as a sole proprietor. You can deduct expenses such as operating costs, travel, equipment and start-up costs. (Nolo, 2011). Self-employment taxes must be paid into Social Security and Medicare programs (the 2012 rate is 15.3%), though they have to pay 100%, they can deduct 50% on Schedule SE. Longevity
“Sole Proprietorships are terminated upon the death of the proprietor. Until the business is assumed by a new owner the business remains a part of the deceased proprietor’s person’s estate.” (Bartschi, 2001, pg.21). Therefore, it is very important that the owner have legal documentation on how and what they would like to happen to their business should they become ill and/or become deceased. Control
As a sole owner of the company you have control over all operations of the business. It can be challenging at times if you have to rely on yourself. You must get a business license from the city in which you are operating and ensure the area is zoned for the business.
All profits are retained by the owner of the business.
Sole proprietors cannot issue stocks or bonds and they may have challenges expanding their business.
A general partnership has two or more partners. All partners have responsible for labor, property and they contribute money to run the business and share in the profit and loss of the company. Liability
All partners are personally responsible for all debt and each partner is responsible for their own actions, actions of their partners and their employees. Income Taxes
Partners are responsible for paying their owned incomes taxes; the company is not responsible for paying taxes directly to the IRS. This is referred to as “flow-through” and is used for income tax (Strausmalk.com 2011). Partnerships may be required to remit deposits to the state income tax board for taxes, payroll, or any other taxes. A partnership is not required to file Federal Income Tax.
Partnership ends with death, disability and if one of the partners leaves the company. The other partners may purchase the remaining percent of the vacant partnership.
Each partner has equal control unless one has vested more into the business than the other. Profit Retention
All income is shared with the partners. Losses are shared equally as well.
Convenience and Burden
The positive side of a General Partnership is the sharing of all costs the company in incurs and the less costly than creating a corporations. The Burden is that all partners are responsible for company’s debt.
A Limited Partnership has general partners as well as limited partners....