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Transcript of Business
By: Anneka Looney, Taylor Johnson,
and Elaina Muterspaugh
Personal Liability Of Owners
Financial Rewards/Tax treatment
Creative direction/Decision making
Ease of Formation
In most cases, shareholders are NOT liable for corporate debts
One exception would be if personal savings intermingle
Owners of a corporation have protection of their personal assets.
Owners are personally responsible for business debts
each partner is responsible for the entire amount of business related obligations/debts
"Comparing Corporations to Sole Proprietorships and Partnerships." <i>Legalzoom.com</i>. N.p., 17 Dec. 2014. Web. 25 Aug. 2015.
"The Basics of Sole Proprietorships." <i>Entrepreneur</i>. N.p., 11 May 2005. Web. 25 Aug. 2015.
"Advantages and Disadvantages of Sole Proprietorships." <i>The New York Times</i>. N.p., 05 June 2007. Web. 25 Aug. 2015. <http%3A%2F%2Fwww.nytimes.com%2Fallbusiness%2FAB4113314_primary.html>.
Corporation Basics." <i>Nolo</i>. N.p., n.d. Web. 26 Aug. 2015. <http%3A%2F%2Fwww.nolo.com%2Flegal-encyclopedia%2Fcorporation-basics-29867.html>.
"Business Structure Basics." <i>Entrepreneur</i>. N.p., 23 Sept. 2010. Web. 26 Aug. 2015. <http://www.entrepreneur.com/article/75118>.
How Partnerships Are Taxed." <i>Nolo</i>. N.p., n.d. Web. 26 Aug. 2015. <http%3A%2F%2Fwww.nolo.com%2Flegal-encyclopedia%2Fhow-partnerships-are-taxed-29710.html>.
"Partnership: The Pros and Cons." <i>Spruce Up Your Finances</i>. N.p., n.d. Web. 26 Aug. 2015. <http://spruceupyourfinances.com/2010/09/17/forms-of-business-partnership/>.
Types of Ownership
Indirectly (family members)
Independent legal entity
Owner gets liability protection
Owners of a corporation pay double taxes
Subject to self employment taxes (13.3% on the first $106,800 of income)
only non-profit corporations are subject to these taxes
The corporation is responsible for paying taxes on profits that remain in the business after all salaries, bonuses, overhead, and other expenses are paid.
There is double taxation on the business' earnings that the owner has to pay on both state and federal levels.
you have someone else to run the decision by so you can be certain you are making the right one
you should take time to get to know your partners interests so it is easier to make decisions
cost less to establish
NOT required to pay unemployment insurance taxes on his or her salary
Can operate without any formal organization or agreement
I.Can operate under a fake name or the name of the owner
A.Ex. Nancy’s Nail Salon
1.Fake name is only a trade name
II. Register his or her name and secure local licenses
III. The sole proprietorship has no separate identity under the law
Owner has liability (in the case of loopholes in the bylaws of a corporation.)
Just a little more than buying and selling goods and/or services are needed
There is no formal filing required to form a sole proprietorship
"A sole proprietor has complete control and decision-making power over the business. "
- New York Times
In corporations, decisions are often made starting with the CEO and the Board of Directors. After it has passed this initial process, it will go through the lower groups of the hierarchy.
There should be a legal agreement among partners that identifies: how much time and capital each will contribute, how decisions will be made, how profits will be shared, how disputes will be resolved
Corporations are liable for taxation by the IRS on the following:
These are disadvantages
Each member of a partnership needs to set aside money to later pay taxes on his share of annual profits
Corporations are not easy to form. They typically have hundreds of employees, therefore directors must be appointed and extensive bylaws must be written. In addition to this, there are many licenses and permits must be obtained.
Decision making starts at the head of the hierarchy of the business.
Shareholders in the business have to contribute.
Partnerships are typically pretty easy to form. They are the only business entity that can be formed based on an audible agreement, therefore they do not require a large amount of legal paperwork.
There is only a small amount of paper work done between the two partners (see "Legal Structure")
Both decision-making processes involve multiple people.