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This topic contains 8 replies, has 6 voices, and was last updated by  Anna Boyko 2 weeks ago.

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  • #242455

    danielhowell
    Participant

    For the benefit of the business owner, I’ve listed the six types of business organizations with easy to compare pros and cons. Since small businesses change over time, it’s important to understand that what business organization you chose today will change with the business; “the tax laws and other regulations that influence the way we operate also are in constant flux” (Anthony, n.d, p. 2). Understanding the advantages and disadvantages of each business type is imperative; since the right business organization is based on individual circumstances, not a magic bullet that works for everyone and every unique situation.

    #242457

    alexhsdr
    Participant

    “C” corporations are taxed at the corporate level. Sole proprietors, “S” corporations, and partnerships are pass-through entities and taxed at the shareholder level. Limited liability companies can be taxed at either the corporate level or the shareholder level depending on the owner’s choice of organization: sole proprietorship, partnership, “C” corporation, or “S” corporation.

    #242458

    johnpketchum12
    Participant

    Income taxes – Self-employment taxes for Medicare and Social Security are paid in full, as opposed to employees who pay half and the employer pays the other half. Half of the cost of self-employment taxes is deductible. Business profit is considered self-employment income and is reported on a Schedule C tax form. You receive no salary as a Schedule C business owner. If you wanted to leave money in the business with the intention of increasing inventory or saving for a new piece of equipment you may be paying higher taxes. “If you operate as a sole proprietor, those “retained” profits would be taxed at your marginal individual tax rate, which is probably more than 25%. But, if you incorporate, that $50,000 would be taxed at the lower 15% corporate rate” (Pakroo, n.d., ¶ 13). In other words, you will be taxed on all profits of the business regardless of the amount of money you withdraw from the business.

    #242460

    johnpketchum12
    Participant

    Convenience or burden – This is the easiest form of business to start and dissolve. However, due to the inherent risks associated with manufacturing, transporting, and installing cabinetry, the risk of overwhelming financial liability outweighs the convenience factor.

    #242461

    danielhowell
    Participant

    Liability – Good only when there’s a small risk for liability exposure. An accident at the factory, en route to a job site, or at the job site can result in loss of not only the business assets but also all personal assets.

    #242462

    alexhsdr
    Participant

    Profit retention – If a partner decides to leave the partnership, the business could dissolve. Selling of one’s partnership interest is only allowed if the partnership agreement permits it.

    Convenience or burden – Like a sole proprietorship, general partnerships can be created without formalities. However, due to the inherent risks associated with manufacturing, transporting, and installing cabinetry, the risk of overwhelming financial liability outweighs the convenience factor.

    #245045

    drivepundits
    Participant

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    #247823

    verselected
    Participant

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    #263232

    Anna Boyko
    Participant

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danielhowellSix Types of Business Organizations