Lit 1 Task 1

1459 Words Jun 13th, 2013 6 Pages
Task 1 Part A (the report)

LIT 1

SOLE PROPRIETORSHIP: Has only one owner. Easy to start up. Some of the advantages are: owners may do whatever they want to with the business and if they want to go on vacation they can. One of the disadvantages they cannot bring in another person to help run the business. This business form is particularly common.

• Liability: The owner has unlimited liability. When the business fails it is up to the owner to pay all the creditors off.

• Income Taxes: The owner files everything on his or hers personal income taxes.

• Longevity and Continuity: When the owner dies the business fails.

• Control: Owner controls the business.

• Profit Retention: Profits belong to the owner to use anyway
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In a C- Corporation the profits are divided among the stockholders. The amount of profits depend on the percentage stocked owned. For example if you owned 15 percent of the corporation’s stock, you may receive 15 percent of the profits. The more stock you own the greater the return.

• Location: Laws vary depending on the state regarding corporations. Business can be set up in any commercial locations. If you are moving your C- Corporation you must obey the laws in the state you will be operating in. You will need register your new name and file a new certificate of incorporation and pay the fee. It’s best to dissolve your current corporation if your moving to another state.

• S- CORPORATION: S- Corporation created by law. S-Corporations taxed differently than C- Corporations. S- Corporations are not taxed on earnings. The stockholders claim on their taxes the losses or profits.

• Liability: The business is liable for all of the corporation’s debts or losses.

• Income Taxes: S- Corporations are tax paying entity, the business files tax returns but not taxed on earnings. The stockholders claim losses or profits on their personal tax returns.

• Longevity and Continuity: S- Corporation is similar to the C- Corporation that even after the death of the founder will continue. Corporation can be dissolved by shareholders or a court order.

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

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