University Of Phoenix
Small Business Idea Paper
Small Business Idea Paper
A business can create large sums of income for an entrepreneur or entrepreneurs. Most future business owners have an idea of what type of service or product to offer. Deciding the type of business organization to become can be a tough decision. Whether the it be a sole proprietorship, partnership, C- Corporation, S- Corporation, or a Limited Liability Corporation, there will be many factors to take into consideration. It is important to be educated or familiar with each business organization along with implications and benefits. The reason why the proper business organization is important is because, as an entrepreneur picking the right business organization for the business he or she wants to pursue could be difference between success and failure. Sole Proprietor
A sole proprietor is a business owned by one person. It is the easiest to form of the business forms. An advantage of a sole proprietorship is an individual proprietor owns and manages the business and is responsible for all business transactions. This can also be a disadvantage, because one person is responsible for the success of their business. Tax Implications
According to Entreprenuer.com (2005),
Because a sole proprietorship is indistinguishable from its owner, sole proprietorship taxation is quite simple. The income earned by a sole proprietorship is income earned by its owner. A sole proprietor reports the sole proprietorship income and/or losses and expenses by filling out and filing a Schedule C, along with the standard Form 1040. Your profits and losses are first recorded on a tax form called Schedule C, which is filed along with your 1040. Then the "bottom-line amount" from Schedule C is transferred to your personal tax return. This aspect is attractive because business losses you suffer may offset income earned from other sources.
As a sole proprietor, you must also file a Schedule SE with Form 1040. You use Schedule SE to calculate how much self-employment tax you owe. You need not pay unemployment tax on yourself, although you must pay unemployment tax on any employees of the business (para. 3-4). Legal Implications
Sole proprietors are responsible for debts and lawsuits. This example from entrepreneur.com (2005) explains it best. For example, assume that a sole proprietor borrows money to operate but the business loses its major customer, goes out of business, and is unable to repay the loan. The sole proprietor is liable for the amount of the loan, which can potentially consume most of the owner personal assets (para. 6).
Financial Statement Associations
Sole proprietorship is associated with all financial statements including the balance sheet, income statement, cash flow statement, and the shareholders statement (Banks, 2012).
A partnership is a business owned by more than one person. There like the sole proprietorship the advantages can also be the disadvantages. An advantage of a partnership is the opportunity of having multiple individuals fund the business. Because there are multiple individuals willing to fund the business, those individuals also have a say so in what ideas and strategies to implement. This could pose therefore, be a disadvantage of a partnership. Unlike the sole proprietorship, a partnership involves multiple individuals owning a piece of the business. Along with shared ideas, also comes shared profit. Legal Implications
Legally all partners that are listed as owners are legally responsible for a lawsuits or debts. According to Richard Einerhann of Amaziness.com (2010)
Unless a partnership agreement states otherwise, the partners share business profits and losses equally, and each general partner has an equal right to participate in management and control of the business (para. 2).
According to William Perez (2009) of...