Entity Business Plan
University of Phoenix
BUS/415: Business Law
Instructor: Stuart Schwartz
May 12, 2008
Entity Business Plan
Business entities are legally recognized organizational units which provides goods and services against some kind of reward generally money. Two major business entities exist; for-profit business entities and nonprofit business entities. This paper focuses on a for-profit business entity.
The Exportation and E-Commercialization of Tahitian Pearls
The e-commercialization of Tahitian pearls strives to provide affordable high quality pearl jewelry such as necklaces, brooches, earrings and bracelets to all men and women with an elite ...view middle of the document...
An Analysis of the Strengths and Weaknesses of Business Organizations such as Sole Proprietorships, LLCs, Partnerships and Corporations
A business operated as a sole proprietorship has one owner who is only required to pay income taxes on the profits made because the business is indissociable from the owner. Paying only income taxes allows sole proprietorships to avoid double taxation often suffered by corporations. For this reason, the accounting requirement of sole proprietorships is reduced which translates to cheaper accounting costs. In addition, sole proprietorship businesses are generally least regulated by government and requires no legal formalities in starting-up or in dissolution.
On the other hand sole proprietorship businesses present several drawbacks such as full liability of the owner if sued, extreme difficulty in acquiring outside capital, uncertainty of the duration of the businessâ€™s existence given that it depends on the owners will and whim.
Limited Liability Companies (LLCs)
In a way, LLCs are sole proprietor businesses whose owners benefit from a limited liability for the actions and debts of the business. Outside this essential difference, LLCs benefit from all the strengths of sole propriety businesses such avoidance of double taxation, cheaper accounting and administrative costs. Furthermore, LLCs allow flexible taxation options such as default tax classification or check-the-box taxation in which LLCs could choose to be taxed as sole proprietor businesses, partnership businesses or corporations. In addition, LLCs could take on a characteristic of partnerships which allows profits or loses to be distributed separately to the economic interests assigned to members without transferring the title of ownership to the members.
LLCs are a comparatively new form of businesses whose distinct concepts are not fully understood by the public making it difficult to raise capital and are sometimes misclassified as corporations or partnerships in some states or other nations thus stripping the LLCs of their tax and limited liability advantages.
Partnerships function like corporations except that the partners of the business benefit from an income tax exemption of the dividend gained.
On the other hand partners are often exposed to much more liability than shareholders of a corporation.
By definition, â€œa corporation is a legal entity or structure created under the authority of the laws of a...