Lit1 Task 310.1.2-01-06 Essay examples

• Control: An S- Corporation only allowed a small number of shareholders and the shareholders must be

Liability: Ownership of a C-Corporation is vested in its stockholders, whose liability is limited to the amount of their investment. The Corporation is liable for all of its debts, and for the actions of employees acting as agents of the organization. Creditors may lay claim against corporate assets, but cannot reach stockholders’ personal assets. Additionally, stockholders have no claim against corporate assets.

Liability – There are several liability within sole proprietorship. As the owner you are a

* Limited Liability - Unlike partnerships and sole proprietorships, corporate shareholders are not liable for any of the corporation's debts.

Limited liability: the liability of investors is limited to their personal investments in the corporation.

S-corporations are almost entirely small businesses due to restrictions placed on their formation by the US tax code. The requirements to make the election to become an S-corporation include limiting the company in terms of stock types such as common or preferred and limiting the number of shareholders. Even

1) The S corporation rules were enacted to allow small corporations to enjoy the nontax advantages of the corporate form of business without being subject to the tax disadvantage of double taxation.

In determining whether or not XYZ should elect to become an S-Corp, there are many advantages and disadvantages and various tax consequences that need to be weighed. The biggest advantage in electing S status is avoidance of the double taxation associated with C-Corps. This means that items of income, deduction, gain or loss are pass through to its owners and the entity itself is not subject to tax, thus there is only one level of taxation, at the shareholder level. Other advantages of becoming an S-Corp include not having to deal with the alternative minimum tax that may applies to C-Corps with greater than $7.5 million in annual gross receipts, and not having to convert to the accrual method of accounting when average gross receipts exceeds

Generally, an S corporation does not pay corporate level tax, as C corporations do. The corporate income, whether distributed or not, is always taxed to the shareholders, and the shareholders assets and bank accounts are protected from any business

C. its income is not subject to corporate taxation but is taxed as part of the proprietor's personal income.

A corporation is a standalone entity. There are two types of corporations, general or S Corp. Advantages of corporations consist of limited liability, capital through stock sales, attractive to employees, and receiving corporate

Liability – A corporation is a separate legal entity which means all of the liability is responsible to the corporation. Shareholders are very much so somewhat the same as limited partners they can only lose the amount of what they invested into the corporation.

Control: Control is exercised by all partners. As such, each partner is an agent of other

In order for an informed decision to be made in regards to appropriate business structure for any business it is necessary to understand each business structure separately and any attempt to understand business structure must consider the C-corporation as a baseline against which to compare subsequent business structures. A C-corporation is a business organized as a separate entity from the owner or owners of the business that requires the observation of certain formalities. In Texas these formalities include adopting bylaws, maintaining a record of accounts, issuance of stock, recording the issuance and transference of stock, recording minutes of board of director and shareholder meetings, as well as maintaining a record of current and past shareholders (Tex. BOC § 21). It is important to remember that corporate formalities will require time and expense to maintain and every attempt should be made to comply with these requirements to protect the liability limitation of the corporation’s shareholders, officers, and owners.

Raising capital – another advantage of a C corporation is that it can easily raise capital when compared to a sole proprietorship or a partnership. This is mainly because this kind of corporation usually has stocks to sell. According to Etuk (2012), most investors are often lured with the prospect of dividends in instances the corporation makes a profit. Practically, this eliminates the necessity of C