The Characteristics Of A Business Entity

The business entities of corporations and partnerships share many similarities, however key difference exist, primarily in terms of formation, taxes and liability. This section will largely address the issue of liability, in terms of the effects of damages, disclosure requirements and personal liability for both corporations and partnerships. Additionally Amazon will be examined as a partnership rather than a corporation to further illustrate these differences.

Suppose that Katherine, Brianna, and Paige have formed a limited partnership to operate a video arcade. Katherine is the general partner. She has contributed $2,000 and her time to get the operation running. Brianna and Paige, the limited partners, have each contributed $3,000. After one year of operation, the arcade has debts of $10,000, and the three partners decide to discontinue their business and the limited partnership. Brianna and Paige want their investment returned to them. Who should Katherine, who is winding up the business, pay first, Brianna and Paige, or the creditors? How much will Brianna and Paige receive? How about Katherine?

If your business investment is an S Corporation, IRC Section 183, would bar you as an individual, or the S Corporation itself, from deducting amounts spent on activities that are performed as hobbies. Is the intention of the business you are investing in to earn profit? You will want to make sure that your business is a profit-seeking business, because this is the only way that you will be able to deduct in a trade or business or for your business investment expense. IRC Section 162, IRC Section 212. This rule also applies if your business investment is for a partnership. Therefore, it is vital that the business investment is for the intention to make profit. Id.

There are many other forms of business entities available to entrepreneurs, the main type are sole proprietorship, general partnership, limited partnership, limited liability company (LLC), and corporations.

¶6201 Overview—Code Sec. 162 Under Code Sec. 162, all ordinary, necessary and reasonable expenses incurred in carrying on a trade or business activity are deductible. This is true whether the taxpayer’s business activities are structured as a sole proprietor, a partnership, or a corporation. Allowable trade or business expenses incurred by individuals are deductible “for” AGI, usually on Schedule C, attached to Form 1040. ¶6205 General Criteria There are four requirements for an expense to be deductible as a trade or business expense: (1) It must be related to carrying on a trade or business activity (as opposed, for example, to a hobby activity); (2) It must be ordinary and necessary; (3) It must be reasonable; and (4) It must be paid or incurred during the taxable year. ¶6215 Expense Must Be Incurred in a Trade or Business Activity A deduction is authorized by Code Sec. 162 only if the expenditure is paid or incurred in an activity that constitutes a trade or business. The purpose of this requirement is to deny deductions for expenses incurred in activities that are primarily personal in nature. Business status requires both a profit motive and a sufficient degree of taxpayer involvement in the activity to distinguish the activity from a passive

All of the following are factors that could have led them to go into business except

Haefren Baum GmbH is a home furnishings retailer. The company was established in 1965 and incorporated in 1970. Haefren is a major customer of Wiegandt GmbH and has served as Wiegandt 's since 1968. Haefren currently owns one location in downtown Cologn and three other outlets in suburb Rhineland.

Sole trader – self-employed and responsible for all business finances. Sole traders have to adhere to legislation such as Consumer Protection Act 1987. This holds you accountable for knowingly selling faulty products that cause harm to a consumer. They must also pay income and National Insurance Tax and provide a ‘self-assessment tax return’ each year.

Before you ;can open the doors to your new business, you will need to choose a business entity. This will be your identity for tax and other legal purposes. The entity that you choose will determine how you are taxed, how much liability you have, and how you have to keep your records throughout the year. Your business entity will also dictate how large your business will be able to grow, if you can have investors, and how you will be viewed by the global market.

Effectiveness in meeting team targets: Employees need to be effective in meeting team targets so they keep on top of all of the work they have to do and also so the decisions they have to make as a business are made smoothly. This will also increase their reputation if all decisions are made more effectively and quicker so could increase the number of regular customers for the business. This will also mean that the staff will be able to help customer quickly and efficiently.

Enclosed is the Justification Report covering information related to different types of entities that could be chosen to establish a business. Furthermore, the report explains in full details the advantages and disadvantages of each business entity, and how those factors could fulfill the needs of each particular individual.

V. Discuss, in detail, how this entity is taxed (if at all) and what filing requirements it has with the IRS (discuss only for the entity you have recommended).

Ans: There will be 3 to 4 persons were going to start a new business. But in this context, it needs to be mentioned

I have chosen to do my research in small business. I want to know what it takes to build a successful business. What are the skills needed to start a new business? What are some of the steps to building a business model and plan? I am working on getting my degree in business. I am a general manager and will be soon help the company expand in opening two new stores in the next few months. This is something that is exciting to be able to expand the brand. This experience will help me when I am ready to own my own business. I know a small business is a big responsibility. As an owner, one has to dedicate lots of time and money to grow the brand and create customer loyalty. I know that simply being in love with an idea or product produced is not enough to survive in the business world. What are the key elements of a successful business? I want to learn more about creating a successful business plan and the logistics it takes to start a small business. I want to learn as much as possible about becoming an entrepreneur.

Sole traders have unlimited liabilities,meaning that in terms of law there is no separation between them,hence the sole trader is also liable for the debts incurred within the business, which makes it very risky to run for a long-term.