A sole proprietorship is a business form that includes just one owner. This business form is special in that there is legally no difference between the business and the owner. They are considered one and the same. Although there are advantages of this form, such as flexibility in setting work hours and profits of the business remaining in scope of control, there are also many disadvantages. One prime example that is probably the most discouraging is liability. If the business fails or financial obligations are not met, the responsibility is solely on the owner. Another disadvantage is not having the freedom to bring in anyone as a partner. The business ...view middle of the document...
While the limited partner enjoys limited liability, the partnership will still have to be formed under state statutes.
"For federal income tax purposes, a C corporation is recognized as a separate taxpaying entity. A corporation conducts business, realizes net income or loss, pays taxes and distributes profits to shareholders." (http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Corporations). The major disadvantage of having a C Corporation is double taxation. Since the corporation is a legally a separate taxpaying entity, they are responsible for the corporations taxes on net income. The corporations must then pay shareholders their dividends, which are then taxed again.
S Corporations differ from C Corporations when it comes to taxation. "Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates." (http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/S-Corporations). S Corporations are very beneficial to small family businesses or to a...