Business Case Study

Corporations are legal entities which issue stock to investors who purchase them and become shareholders of the company. The risk taken by investors is that when they buy stocks it is possible that the individual company will not do

Downsides to being a public limited company is that there will be greater access to the company’s financial performance and actions which loses abut of the businesses privacy. The value of the company will be determined by financial markets through the trading of the company’s shares.

An S corporation recently switched to a limited partnership association and concurrently opted to be taxed as a corporation and seeks advice as to whether its actions will terminate its S corporation status.

Some of the advantages that the S Corporation has is that they have protected assets. The protected assets where the shareholders are basically no responsible for the certain debts of the corporation. S corporations also have a very good privacy protection system. It is important to keeps certain things private in a business.

A corporation is owned by shareholders and these shareholders elect the members of a board of directors to handle daily business operations. Shareholders are not held liable for the companies ' debt and legal problems which means a corporation is seen as a separate entity from its shareholders. According to Marnie Kunz (2015), “Corporations are required to pay state and national taxes, and shareholders must also pay taxes on their salaries,

Ebert & Griffin (2005) outline three disadvantages to operate a corporation form of business. First, the corporation requires a high cost, or a lot of fund, to put

Disadvantages:    Unlimited liability-can lose both business’s assets and their own personal possessions. Capital is limited to the wealth of one individual. May limit business growth. Have to work long hours and have poor holidays and rewards

Many people are fully supportive of these Corporations right to artificial citizenship. It is, in their defense, essential to the survival of the Corporation to have the ability to possess property, enter contracts, etc. without these guaranteed rights the U.S. Government could take any Corporations property without compensation, suppress any Corporations rights to a fair trial, and raid any Corporations warehouses for insignificant reasons. All of these injustices would be possible due to the Corporation not being considered a partnership or another form of business and not being owned by a single entity. Ultimately, these rights are seen as necessary and without these rights a Corporation could not exist in society; and as an extension this is why the majority of people see the need for these businesses to possess individual rights.

As a corporation, the McGees may be able to find new sources of funds for business development. Many people, including shareholders, could invest in the corporation. Finally, the corporation is the most reliable and trusted form of business entity. A possible downside to incorporation, the McGees may have to put up some of their private assets as a guarantee for the repayment of funds to financial institutions, if they are not found eligible for payment of money. Incorporation is not a small ordeal; it involves many legal formalities, laws, agreement documents, etc. It is necessary to prepare and revue all these documents carefully. Additionally, setting up the corporation will be an expensive task. There are good and bad aspects to a corporation in reference to taxes. With a corporation, the McGees will be taxable for self income, as well as for the corporation's revenue. However they will enjoy personal tax credits as with the sole proprietorship.

There are also disadvantages to inverting into a partnership company, all the profits that the business has made has to be shared out amongst all of the partners, all of the decision making is split between all of the partners, that may cause arguments between the partners because one may say something should be don’t and another could say something else should be done. There are two types of limited company, there is private limited company and public limited company. A private limited company can have one or more members (shareholders), the finances for the business come from shareholders, borrowing and retained profits, and also raising finance to start a private limited company is easier because the success rate for them is also quite high. There are also disadvantages to having a private limited company, they can not offer shares to the public (on the stock exchange) only people within the business can buy shares in the business, all the accounts from a years trading in a private limited company has to be published every year, doing this gives there competitors access to the companies personal information, profit is shared out between all of the shareholders.

Disadvantages: (1) The process of incorporation requires more time and money than the other forms of business. (2) They are monitored and subject to rules of federal, state, and, local entities, hence may have to meet many more requirements and administrative documents to demonstrate compliance. (3) They are subject to paying more taxes. Dividends paid to shareholders are not deductible as a business expense, hence, such income may be subject to double taxation.

On top of those benefits, it also gives the companies name credibility because of the added Inc. or LLC extension it gives to the outsiders. This would attract possible investors, more customers, and even inform the community giving the company publicity. There are small disadvantages when incorporating. Incorporating isn’t cheap. Before you become a corporation, you have to pay a state filling fees such as its registration fee, and other taxations. The amount depends on which state you choose to incorporate with.

There are some disadvantages of corporations, a corporation is not cheap or simple to operate. They will have to hold board meetings and annual shareholder meetings. Corporations have to file corporate tax returns, they are subject to double income taxation.

A Limited Partnership is made out of one or more broad partners and one or more constrained partners. The general partners deal with the business and share completely in its profits and misfortunes. Constrained partners partake in the profits of the business, yet their misfortunes are restricted to the degree of their venture. Constrained partners are normally not included in the everyday operations of the business.

As there are advantages, being a private limited company can have its disadvantages. Some disadvantages are: