BUS 415 Week 4 - DQ 1 - 7470

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Wk 4 dq 1…How would you define each of the five business organizations? How would you analyze the tax implications of each organization? Can you theorize what businesses would be best suited to each type of organization?

1). Sole Partnership 

The first business organization Cheeseman, has described is known to us as Sole partnership. According to (Cheeseman, 2010), “A sole proprietorship is the simplest form of business organization. The owner of the business—called the sole proprietor—is the business. There is no separate legal entity. Sole proprietorships are the most common form of business organization in the United States.  “Taxation of a Sole Proprietor a sole proprietorship is not a separate legal entity, so it does not pay taxes at the business level. Instead, the earnings and losses from a sole proprietorship are reported on the sole proprietors personal income tax return. A sole proprietor has to file tax returns and pay taxes to state and federal governments” (Cheeseman, 2010). 

I believe that someone who is not looking for a partner and plans on owning and running their business alone would benefit from a Sole Partnership. For instance, this could be a sewing shop, or sign design shop. 

 

2) General Partnership 

The second business organization defined by Cheeseman is known to us as a General Partnership. “General partnership, or ordinary partnership, has been recognized since ancient times. The English common law of partnerships governed early U.S. partnerships. The individual states expanded the body of partnership law. A general partnership, or partnership, is a voluntary association of two or more persons for carrying on a business as co-owners for profit. The formation of a partnership creates certain rights and duties among partners and with third parties. “Taxation of General Partners Partnerships does not pay federal income taxes. Instead, the income and losses of a partnership flow onto and have to be reported on the individual partners’ personal income tax returns. This is called “flow-through” taxation. A partnership has to file an information return with the government, telling the government the amount of income earned or losses incurred by the partnership.

Now I believe someone who is starting a small business, say a sports shop, tanning salon, or perhaps a small restaurant may benefit from a general partnership a great deal. 

 

3) Limited Partnership 

Third is known to us as a Limited Partnership. According to (Cheeseman, 2010, p. 259), “Limited partnerships are statutory creations that have been used since the middle Ages. They include both general (manager) and limited (investor) partners. Today, all states have enacted statutes that provide for the creation of limited partnerships. In most states, these partnerships are called limited partnerships, or special partnerships. Limited partnerships are used for such business ventures as investing in real estate, drilling oil and gas wells, investing in movie productions, and the like.” In most senses Tax related issues or taxes if you will are referred to in the same manner as a general partnership. 

I believe that in this sense a person who owns or operates a major well known Film industry, or perhaps a major real estate company as well would benefit a great deal from using a limited partnership. 

 

4) Limited Liability Company 

Fourth is known as Limited Liability Company, which is known to Cheeseman as, “A limited liability company (LLC) is an unincorporated business entity that combines the most favorable attributes of general partnerships, limited partnerships, and corporations. An LLC is taxed as a partnership unless it chooses to be taxed as a corporation, the owners can manage the business, and the owners have limited liability. “Taxation of an LLC Under the Internal Revenue Code and regulations adopted by the Internal Revenue Service (IRS) for federal income tax purposes, an LLC is taxed as a partnership unless it elects to be taxed as a corporation. Thus, an LLC is not taxed at the entity level, but its income or losses “flow through” to the members’ individual income tax returns. This enables LLC members to avoid double taxation.

I believe that the best suited business for this type of organization would be someone who is looking to open Real Estate Company, or is already an Owner of a Real Estate Company. 

 

5) Corporation 

Fifth is known as Corporation. According to Cheeseman, 2010, “Corporations are the most dominant form of business organization in the United States, generating over 85 percent of the country’s gross business receipts. Corporations range in size from one owner to thousands of owners. Owners of corporations are called shareholders." 

According to (2010), “Other important reasons corporations are formed are because of certain tax benefits, compensation and wage benefits, to increase the credibility of the company with potential investors, and in a much related manner, to attract investors.           

 I believe that a big business that has a potential benefit one day of becoming more then just operating in one location would benefit from becoming a company, for instance, a big tire company or perhaps an automotive company. These types of businesses would benefit from becoming a company. 

 

 

http://www.companiesinc.com/incorporate/businesstypes/corporation.asp Chapters 14-16 also for sited material from Cheeseman.

 

Solution Description

Wk 4 dq 1…How would you define each of the five business organizations? How would you analyze the tax implications of each organization? Can you theorize what businesses would be best suited to each type of organization?

1). Sole Partnership 

The first business organization Cheeseman, has described is known to us as Sole partnership. According to (Cheeseman, 2010), “A sole proprietorship is the simplest form of business organization. The owner of the business—called the sole proprietor—is the business. There is no separate legal entity. Sole proprietorships are the most common form of business organization in the United States.  “Taxation of a Sole Proprietor a sole proprietorship is not a separate legal entity, so it does not pay taxes at the business level. Instead, the earnings and losses from a sole proprietorship are reported on the sole proprietors personal income tax return. A sole proprietor has to file tax returns and pay taxes to state and federal governments” (Cheeseman, 2010). 

I believe that someone who is not looking for a partner and plans on owning and running their business alone would benefit from a Sole Part