Accounting: Business Law and Sole Proprietorship Essay

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Creating Small Business
Richard Kofoworola
ACC561
February 09, 2012
Franklin Olivieri

Creating Small Business
Introduction
This report will discuss the creation of a new small business as a result of government program and funding to encourage more people into owning their own business and creating more tax-base for the government. We will also discuss the inherent characteristics of the four business types. And the unique services the new small business will provide to the general public.
Advantages and Disadvantages of a sole proprietorship
According to nytimes (2012) sole proprietorship is the easiest type of business to start by just one person and the followings are its advantages:
• Sole proprietor has complete power and control of the decision making of the business
• Sale or transfers can occur at the discretion of the sole proprietor
• No corporate tax
• Minimal legal fee for forming business
• Few formal business requirement
Disadvantages
• Sole proprietor is held liable for any debt incurred by the business
• Responsible for any negligent act incurred by employees
• All responsibilities and decision making associated with the business falls on the owner
• Sole proprietorship don’t usually attract investors due to the high risk of personal liabilities
Advantages and disadvantages of a sole proprietorship (2012). Retrieve from http://www.nytimes.com
Advantages and Disadvantages partnership
According to the company warehouse (2010) partnership is a business form between two or more people but not more than twenty people to finance a business venture in order to make profit.
Just like sole proprietorship, partnership has its own advantages and disadvantages. The advantages are:
• Larger capital can be raised with larger number of partners
• There are flexibilities in running and managing the business and each partner has a say to the any business decision
• Shared responsibility in partnership allows each partners to tap into their core-competence
• Provides moral support and creates an environment for innovative thinking
Disadvantages
• Disagreement between partners is one of the common disadvantages of partnership
• Agreement to things you would not normally agree to, just because majority of the partners agreed to it tends to limits some partners freedom
• All the partners are equally liable for the business’s risk regardless of each individual stake in the business
• Taxation is another disadvantage because it means that partners are taxed in the manner as sole trader, each submitting self-assessment tax return each year
• Profit sharing can create problem in partnership if the profit is shared equally and one or more partners are not putting the effort and time
Advantages and disadvantages of a partnership (2010). Retrieve from http://www.thecompanywarehouse.co.uk
Advantages and disadvantages of C Corporation
In order to form C Corporation, one has to file form 1120 or 1120A, and then a file of article of incorporation is filed with the home state, and they have to abide by the both state and federal laws. C corporation has its own advantages and disadvantages. The advantages are as follows:
• As distinct legal entity, it offers limited liability
• Corporation exist until dissolve, which implies continuity beyond the shareholders life
• Both employees and shareholder can get variety of tax benefits
• C corporation can have fiscal year other than December 31
• There is no cap to the number of shareholders
• C corporation has its own tax bracket, it raises the amount taxed 15 percent for $50,000
• Up to 80 percent of other corporation dividends are deductible
• Ownership are easily transferred through sale or gift
• Capital can be raised through stock sale
• Numerous ways of receiving funds from regular corporation, including some that not subjected to social security tax
Disadvantages
• Due to complexity of C corporation, it requires high expense to
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