Types Of Legal Forms Of A Business

Corporations have their pros and cons. The pros of a corporation include the liability of the corporation instead of individuals, corporate taxes rather than personal taxes, the everlasting nature of a corporation, and the capital corporations make on the stock market. The cons of a corporation include the costs of incorporating, dealing with shareholders, and double taxation.

However, a disadvantage of a public limited company is that Tesco PLC has more chance to gain a much greater number of external shareholders. The company directors will be accountable for the external shareholders when listed on the stock exchange. Another disadvantage of a public limited company is that Tesco PLC has more greater scrutiny from the public of the financial performance and actions.

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.

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.

CONVENIENCE/BURDEN - The major convenience of a C-corporation is how easily it can obtain additional funds through issuing additional stocks. C-Corp's are burdened by the double taxation of both the corporation itself and dividends paid to the shareholders.

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,

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

The Subchapter S corporation structure was created through an IRS tax election. Small business owners mostly use the Subchapter S corporation structure. The advantages of the Subchapter S corporation structure are tax savings, business expense tax credit, and the ability to separate an independent life from shareholders (University of Phoenix, 2013). The disadvantages are shareholders compensations requirements and a stricter operational process. The S corporations are not taxed equally by all states. Most recognize them similarly to the federal government and tax the shareholders accordingly (U.S. Small

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

Proprietorships have three advantages: they are easy and inexpensive to form, subject to few regulations, and no corporate income taxes. The disadvantages are difficult to raise capital, unlimited liability and limited life. Partnership are similar to proprietorships in that they can be stablished relatively easily and inexpensively. The partners are generally subject to unlimited personal liability, this makes it difficult for partnerships to raise large amount of capital. Corporation also have unlimited lives, and easy transfer of ownership, limited liability and ease of raising capital to operate larger businesses. The disadvantages are double taxation, the corporation’s earnings are taxed; and then when its after-tax earnings are paid out as dividends, those earnings are taxed again as personal income to the stockholders. Limited liability reduces the risks endure by investors; and other things held constant, the lower the firm’s risk, the higher its

1. In the eyes of the federal government, an LLC is not a separate tax entity,

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

Disadvantages: unlimited liability, limited life, difficulty in transferring ownership, hard to raise capital funds. Some advantages: simpler, less regulation, the owners are also the managers, sometimes personal tax rates are better than corporate tax rates.

Due to the fact that corporations are separate legal entities from their owners, C-corporations are taxed separately requiring the filing of IRS Form 1120 each year to report its income and take advantage of any credits or deductions for which the corporation may be eligible (Internal revenue Service (IRS), 2012b). Income tax rates for corporation are tailored to corporations and as such are different from those

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.