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Business Forms WorksheetLAW/531 Version 99

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Business Forms WorksheetThere are seven forms of business: sole proprietorship, partnership, limited liability partnership, limited liability Company (including the single member LLC), S Corporation, Franchise, and Corporation. 1. Research and provide three advantages and three disadvantages for each business form.2. Provide a 100- to 200-word summary in which you provide an example business that you would start for each form. What is legally necessary to file in order to form that business? Discuss at least one of the advantages and one of the disadvantages of that form.Sole Proprietorship Advantages

1. Forming a Sole Proprietorship is simple and easy to form and it does not take a large sum of money to start.2. Sole Proprietorship has less government regulations to follow.3. In the Sole Proprietorship all the business decision that have to be made is the right of the ownerDisadvantages

1. A owner have to pay double social security and Medicare as employee 2. Taxes are a huge disadvantage. The owner must file an income form 1040. In addition, The owner must pay self-employment taxes. (legalmatch.com, 2014). 3. The Sole Proprietor does not have the personal limited liability(smallbusines.findlaw.com)Summary

I would like to start a pet supply store. What I need to file is the certificate of trade name. There is no other form to be file. One of the advantages is that I make all the business decision such as the hours of operations, if or if not to hire an employee, and what type of pet supplies to sell. The main disadvantages the fact not having the limit liability protection. Another disadvantage that concerns me is paying the double social security and Medicare.All consider this would be my first business and the Sole Proprietorship would be the best solution.

Partnership Advantages

1. Forming of the partnership is easy to do.2. Do not pay federal income tax3. With Partnership, there is more capital available.

Disadvantages

1. Just like in Sole Proprietorship, there is no limit liability protection.2. The all partners are responsible for the business. 3. In business, decisions for the dispute that could come about all partners must decide together. In addition, any partner who wishes to leave must have the approval of all partnersSummary

Example of a partnership is an accounting firm. There are serval documents that need to be file in order to form a partnership. The following is a list of these documents:1. Statement of partnership authority2. Trade name application3. Form SS-44. Partnership Agreement The advantage that attracts me to the partnership is the more partners that are the more capital is available. The disadvantage is the no limited liability protection. If one, of the partners make causes trouble with the clients and these clients sue the business. This means I have to answer as well and this will give the business a bad name when the story comes out in the newspaper

Limited Liability Partnership Advantages

1. Liability protection2. The LLP does not pay tax as whole but the partners themselves on their individual tax returns.3. Flexibility meaning Partners have the authority to decide how they will individually contribute to business operations.(Scott, n.d)Disadvantages

1. Higher costs than the Sole Proprietorship2. Some states limit the creation of a limited liability partnership to professionals such as doctors or lawyers. (Scott, n.d.)3. In some states, the tax authorities do not recognize the LLP. This could be a disadvantage for a partner.Summary

An excellent LLP that I would open is a Lawyer studio. The reason is the advantage liability protection. On the hand, what makes me back away is the disadvantage of the high cost of opening the studio and the LLP itself.

What must be file are the articles of limited liability partnership. $1 million of liability insurance that covers negligence, wrongful acts, and misconduct by partners or employees

Of the LLP (Cheeseman, 2013)

Limited Liability Company, (including the single member LLC)Advantages

1. Limited Liability Protection2. Avoids double taxation3. A few benefits can be deducted as an expense in the business.

Disadvantages

1. Is more expensive to start than the other forms of business.2. Paper that is extremely complicated to be file with the secretary of state.3. Taxes are paid as separated tax entity.Summary

I would open a clothing manufactory. This would because of the advantage of double taxation and the few benefits that can be deduct as a business expense. The disadvantage that would stop me is the startup cost that is so high. The clothing industry would be good to go into with the right people. What have to be file are the articles of organization with the secretary of state. Although not require to be file the operating agreement would be needed as well. This would help the partners of the LLC what kind of conduct is expects from them.

S CorporationAdvantages

1. S corporation shareholders are not subject to self-employment taxes (nolo.com).2. Divide the losses of the business and again reporting these loses their income taxes.3. Limit liability protection for bad debts and other liabilities.

Disadvantages

1. Owner who have more than 2% shares in the business receive benefits.2. The interest in the ownership can vary based on the individual owners income and profits from the business.3. The paperwork is more complicated than the LLC.Summary

I would open a real estate as an S-Corporation. Because it is an interesting business and if run, right would be profitable. What need to be file are the articles of incorporation. For the IRS the shareholders have to sign and file the IRS Form 2553. In order to form the S Corporation all members must be U.S. citizens and cannot have more than 100 shareholders. My choice for the real estate is because of the advantage of no self-employment tax. The tax would be high cost. The disadvantage that would make me think twice is the paperwork.

FranchiseAdvantages

1. The franchise is already established business 2. The consumer knows the product. This in turn means less work and less cost trying to establish the product.3. Investors are willing to invest in Franchise so receiving business is simpler.

Disadvantages

1. No control over managers and employees.2. Obligated to buy from the suppliers that are in the Franchise agreement.3. Franchise Cost is a disadvantage due to the fact it is an ongoing cost. The cost consists of support and training from the franchisor.Summary

The first step of franchising is filling out the application then sends the application to the franchisor. Once you are approved, you then must file Franchise agreement. This contains the terms and conditions of the franchise. The franchisor is the one who grants the franchisee the licensee. The franchise I would like to open in a Burger Kings because the hamburgers are less grease than the competition. The advantage that convinces me is the known brand of the franchise. The disadvantage is the no control over the employee and the managers. The risk of being the franchisor it takes one or two franchisees to make the franchise look bad.

CorporationAdvantages

1. Limit liability this means that I am not personally liable 2. Taxes are separate from personal taxes3. The Corporation continues after the death of the owner.

Disadvantages

1. The cost of operating the corporation is expensive.2. Double taxation. When the corporation makes profit, they pay tax on the profits. Then when pay the dividends to the shareholders the corporation has pay taxes on the dividends.3. Corporation has to maintain more record of taxes, meetings, banks accounts.Summary

Articles of Incorporation must be file. I would like to start a business like the HP Computer Corporation. The separation of taxes from personal taxes is excellent. Meaning that if the corporation does not pay the taxes my personal taxes status will not be touch. The double taxation really makes a difference in the corporation profits. In a negative through, there are times just that corporation will use all the profits to pay off the taxes.

Reference

All Business (2007) Advantages and disadvantages of sole proprietorships http://www.nytimes.com/allbusiness/AB4113314_primary.html 2007

Clarke, P. (2008) Advantages and disadvantages of sole proprietorship. Retrieve from http://www.legalmatch.com/law-library/article/advantages-and-disadvantages-of-sole-proprietorships.html

Advantages and disadvantages of business organization type Retrieve from http://valuationacademy.com/advantages-and-disadvantages-of-business-organization-types/

Business form and taxation: Pro and Cons Retrieve from http://smallbusiness.findlaw.com/incorporation-and-legal-structures/benefits-and-drawbacks-of-different-types-of-business-entities.htmlCarter, C. (n.d) Key Documents Needed for the Formation of a Partnership Retrieve from http://smallbusiness.chron.com/key-documents-needed-formation-partnership- 24064.html

Scott, S. (n.d)Limited Liability Partnership Advantages & Disadvantages http://smallbusiness.chron.com/limited-liability-partnership-advantages-disadvantages-4429.htmlhttp://www.nolo.com/Cheeseman, H.R. (2013). Business law: Legal environment, online commerce, business ethics, and international issues(8th ed.). Upper Saddle River, NJ: Prentice Hall.Copyright XXXX by University of Phoenix. All rights reserved.Copyright 2014, 2013, 2012, 2011, 2010, 2009, 2008 by University of Phoenix. All rights reserved.