This is just a discussion post from my classmate. I just need to respond. Based

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This is just a discussion post from my classmate. I just need to respond. Based off of what is written, please answer with a simple analysis of what's written. (example: Interesting post, I see that...)

A sole proprietorship is a one-person organization. A person who has a sole proprietorship is the key decision maker and often have no employees. It is the most common and most accessible business entity to have. They have to pay taxes on the money they make the same as a person working for a company does. There is no benefit tax-wise, and there is an even higher risk when it comes to liability in that the person is responsible for any lawsuits or damages. A lawsuit could take a sole proprietor’s car or even home. This type of business entity is also solely responsible for the losses and debts of the company (Strategic Management, 2014).

A general partnership can be two or more people coming together to create a business. Each person has an equal say in the company and can be held jointly responsible for the contracts that are signed by either party (Laurence, Accessed in 2018). While it is a disadvantage to have to share the profits of the company it is also an advantage no to have to bear all the costs. Like a general partnership, all owners are personally and jointly responsible for judgments or liabilities. Another drawback for a general partnership is that the owners have to claim their revenue on their income taxes.

Corporations are large companies that separate the ownership and management of the organization, which is a crucial difference between a corporation and a sole proprietorship. Corporations sell shares of ownership that are publicly traded in stock markets, and they are managed by professional executives (Strategic Management, 2014). Corporations can be broken down into two major components an S-corporation or a C-corporation.

A C-corporation is short for a closely held corporation or a close corporation which means that more than half the shares of the corporation are held by a few individuals. These type of corporations are normally not as structured or formal. They are normally run by the shareholders, and many of them are family run (Murray, 2017). As a corporation as its entity has to pay taxes but as a corporation also has limited liability for the shareholders. A C-corporation has its own tax rate which is significantly different than personal income taxes. Meaning that the individual shareholders cannot be held individually liable for judgments or lawsuits.

An S-corporation is one that has 1 to 100 shareholders and that any money it makes or loses gets passed through to the shareholders. This means that the owners share the net profits from the business and report their share on personal income taxes as well as share the net business loss and offset other income by reporting this loss on personal income taxes. An S-corporation is not subject to a corporate tax rate and instead passes all that to the shareholders (Perez, 2018). The drawback is that if the corporation decides to hold the capital to reinvest the shareholders could still be taxed even though they did not receive the actual income. A shareholder has limited liability when it comes to lawsuits and other judgments against them; it will go against the company rather than the individual.

An LLC or limited liability company is one of the most popular business entities because it allows for limited liability but also allows the owner more control. The LLC is created based off of state laws and provides the owner no responsibility when having to deal with debts(Strategic Management, 2014). When it comes to taxes, the LLC can be charged like a sole proprietorship or like a partnership where the individual shareholder get charged. An LLC does not have its own corporate tax rate nor do they have to pay income taxes or self-employment taxes on the money the business spends. Many owners of an LLC will write off business expenses to lower the actual profits that they have to pay taxes on at that end of the year (Fitzpatrick, Accessed 2018).

Explanation / Answer

A sole proprietorship is a special form of busines in which a single person will be promoter , strategic decision maker, risk bearer , product seller and transaction manager with every stakeholders . There is no tax benefit to a proprietor and there is an even higher risk and liability as this person will be responsible for any lawsuits or damages. A lawsuit could take a sole proprietor’s car or other property .

Partnership is another most popular form of business entity . In this , every shareholder will be responsible as per their investment and liability. It is quite complex for the partners as the owners have to claim their revenue on their income taxes.

There is larger venture typically known as corporation which has separate ownership and management . It will be of two types: 1) C -corporations

2) S- Corporations

In C- Corporation almost half of the shareholders will be managed by few individuals or shareholders.  

As a corporation as its entity has to pay taxes but as a corporation also has limited liability for the shareholders. A C-corporation has its own tax rate which is significantly different than personal income taxes. In this individual shareholders cannot be held individually liable for judgments or lawsuits by any other party.

In S - corporation, the owners share the net profits from the business and report their share on personal incomes as well as loss of the corporation.

A limited liability company ( LLC) has more owner control thats why it is too much popular. LLCs are dealt with state specific laws. They can be charged taxes as per the other business entity.  

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