Chris, I applauded you for creating an amazing pastry shop that has brought mouthwatering joy to south-central Wisconsin residents over the years. Your perseverance in creating this masterpiece, Cupcakes-Palooza, is unrivaled in your industry. For this reason, you truly exemplify the spirit of the entrepreneur. In the beginning, your idea of treating the community of Janesville with delightful cupcakes required self-discipline, grit, and determination. Therefore, you ventured forth and created a sole proprietorship, the simplest and easiest business structure there is. While the sole proprietorship has its advantages, such as individual control of all business decisions and lower tax rates compared to corporations, it also presents the …show more content…
That is to say, if your company ends up on the losing end of a court judgment or incurs debt, the company pays, not you. Thus, your personal belongings, such as your boat and lake house are not touched because of the limited liability protection. Since this is a limited liability; any wrongful acts committed by you, stakeholders, and your employees could require you to be personally responsible. However, I would not let the possibility of any wrongdoings committed by the company, stakeholders, or employees discourage you from reading more on an LLC. In fact, you will learn some advantages that make this type of venture appealing. For instance, you may continue to be the sole owner of the company if you choose or you could have family and friends invest in the company as limited partners. By doing this, you and the members can elect who will be in charge of performing certain tasks, such as overseeing day-to-day operations. Furthermore, you and the members decide how profits and losses are shared amongst one another. The percentage may be based on capital invested by each member or a mutual agreement. Whichever route you choose, make sure you have it in writing before proceeding. Compared to the sole proprietorship, the LLC offers the advantage of raising additional capital to fund projects. Since you have new partners that just invested in the business you just
partnership is having the addition of outside fund while not losing control of the company. While you have invested as a limited partner, it does not give you any say on how the company should be ran. C-CORPORATION: Corporations are defined as a group of people authorized to act as a single entity which is recognized under state/corporate laws. A corporation is treated like a “person” and has the same rights as you or I except it is not protected by Fifth Amendment rights.
When looking at liability, creating an LLC will limit the owner’s exposure to just his invested amount. This will legally shield his home, bank accounts, family’s property and other personal assets from seizure or liquidation in the event the company is held responsible for any of the situations mentioned, such as a cabinet falling or subcontractor failing to perform. It would also protect him in the event the expansion of his company fails, and a worst case scenario of the company going under.
Convenience/Burden- Like a general partnership a limited partnership is easily formed and can enjoy pass through-taxation. It can also be easier to get financing with a limited partnership. A downfall of the limited partnership is that the death of a general partner can dissolve the partnership unless a prior agreement has been established.
A limited liability company protects each partner from personal liability for certain obligations of the company. An important difference from other partnerships is that each partner is liable for the debts and obligations of the partners. With limited liability Company, each state has its own laws governing partners for these vessels. Some states allow only certain professions, such as lawyers and accountants to form LLP. Some states only provide protection from liability for negligence claims, leaving personally responsible for other types of requests partner. For tax purposes, profits are divided equally between the partners and the partnership is not taxed separately.
• Liability: The owner has unlimited liability. When the business fails it is up to the owner to pay all the creditors off.
A limited liability company consists of a single owner, or sometimes more than one owner, and are not taxed as separate business entities. All profits and losses pass through the business to those who own the company. Owners must report profits and losses on their personal tax return filing as a corporation, partnership, or sole proprietorship. If the LLC is ran by a single owner, they file a 1040 Schedule C form as a sole proprietor. Partners file a 1065 form consisting of a partnership, and a form 1120 is filed if the LLC is filing as a corporation. The LLC must be registered such as the State Corporation Commission, Department of Commerce and Consumer Affairs, Department of Consumer and Regulatory Affairs, or the Division of Corporations and Commercial Code. The great thing about an LLC is that the owner has freedom in management. The owner is able to run the organization as they see fit not answering to anyone,
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.
Limited Liability Company (LLC) combines the tax advantages of a partnership with the limited liability aspects of a corporation. LLC’s are governed by the Uniform Limited Liability Company Act (ULLCA). All members of the LLC enjoy limited liability unless there is serious misconduct is committed by said member(s), or a member fails to follow through on an obligation. All this should be outlined in your preformation contract. You will have more flexibility with taxation and options on how to manage the company. It would be advisable to also have an Operating Agreement. This will dictate how management will be hired and fired, division of profits, how to transfer interest in the event a member chooses to opt out or dies. What steps to take in the event of dissociation of a partner, and if it causes the dissolution of the LLC. Most importantly how the members vote in the LLC. The weight of the members vote is in accordance with the member’s capital
The RemyCake bakery created a cohesive team and an established clientele and became a staple within the community. Their exemplary customer service and the charismatic presence of their founders created a unique work and customer environment. However, with the recent retirement of the RemyCake bakery founder, a number of issues have arisen. Our Task Force identified the origin of their organizational issues. The following summary addresses and provides solutions for the RemyCake Bakery’s issues of ineffective leadership style, lack of organizational hierarchy, under-developed employee training program, and poor communication at all levels.
The case depicts KRISPY KREME 's franchise system growth and decline as a lesson to entrepreneurs running a company as a franchisor.
assets of the business owner can be taken to pay off business debts since the two are not
The McGee Cake Company, currently operating as a sole proprietorship, may benefit from forming a limited liability company (LLC). An LLC is a comparatively new type of business entity. With an LLC there are reduced legal formalities in comparison to setting up a corporation. In addition, unlike a corporation, the McGees could set up an LLC yet remain the sole owners of the company. Another advantage as the owners of an LLC, the McGees are taxable only for personal income and not for the income of your LLC. Therefore, they would not pay double income tax. An LLC also has a long
There are a number of forms of ownership that the business can take. The main forms are sole proprietorship, partnership, Limited Liability Corporation, corporation and S corporation. There are advantages and disadvantages to each of these forms that will be discussed in this section. A sole proprietorship essentially has the person as the business. In this situation, the proprietor bears all of the risk involved in the business. Business income flows through to the proprietor's personal taxes. For some individuals there are tax advantages, but for many the appeal of the sole proprietorship is its simplicity. The IRS defines a partnership as a relationship existing between two or more individuals who joint to carry on a business. Partners divide income according to their own agreement and that income flows through to their personal taxes. Partners also have a high level of liability for any legal action that befalls the company.
Firstly, even though there are different types of partnership such as general, limited and limited liability partnership. This three different type has its advantages and disadvantages however we will be mainly focused on general partnership. One advantage of the general partnership is raising capital due to the nature of the business the partners will raise capital to start-up the business. Therefore more partners mean more capital can be put to the business, this allows the business to have more potential for growth and profitability. Another advantage is that a partnership is less complicated to form and run than a company they don’t have legal filing requirements, this means they don’t have to file accounts and documents with Companies House.
The advantages to a LLC are: 1) Reduction of personal liability. A sole proprietor has unlimited liability, which can include the potential loss of all personal assets. 2) Taxes. Forming an LLC may mean that more expenses can be considered business expenses and be deducted from the company’s income. 3) Improved credibility. The business may have increased credibility in the business world compared to a sole proprietorship. 4) Ability to attract investment. Corporations, even LLCs, can raise capital through the sale of equity. 5) Continuous life. Sole proprietorships have a limited life,