Question

1.What are some of the characteristics that make a sole proprietorship an attractive form of business? What are some of the disadvantages.

2.Outline the reasons why a corporation may be referred to as an “artificial person,” and discuss why corporations suffer from “double taxation” on their profits.

Answer 1

1. In the states in which they do business, as well as local regulations and zoning ordinances, sole proprietors must comply with licensing requirements. However, the paperwork and formalities are significantly lower than those of corporations, allowing sole proprietors to open up a business quickly and relatively easily-from a bureaucratic point of view. Starting a business as a single owner, which is appealing to many new business owners who often find it difficult to attract investors, can also be less costly.

A sole proprietor has full control over the company and decision-making authority.
Purchase or transition may occur at the sole proprietor's discretion.
No corporate tax charges Minimum legal fees for the creation of a sole proprietorship

The company's sole proprietor may be held personally liable for the company's debts and obligations. The threat also applies to any liability resulting from acts committed by the company's employees.
The sole proprietor is responsible for all responsibilities and business decisions.
Usually, investors will not invest in sole ownerships.

2. The aim of creating a company is to create a new legal entity that can function as one by many or many shareholders. In the Latin word corpus, or organ, the word integrate has its origins. The new body holds the same legal status as a group's owners and assumes responsibility for their actions, protecting owners from direct responsibility. This does not mean that in the ordinary sense, a company is an individual. This simply means that the corporate entity is an autonomous being capable of taking the same legal actions as individual groups. Since corporations are acting on behalf of the owners, it makes sense to have the same rights as the owners. These rights include the right to property, the right to contract, and equal legal protection. Corporations are being viewed as artificial individuals to this extent. But there are many things people can't do together, including dating, voting and running for office.

Double taxation refers to income taxes paid twice on the same source of income. It can occur when both the corporate and personal level of income is taxed. Double taxation also occurs when the same income is taxed in two different countries in international trade or investment. With 401k loans, it can happen.Since companies are considered separate legal entities from their owners, double taxation frequently occurs. As such, like companies, corporations pay taxes on their annual earnings. If corporations pay shareholders dividends, these dividend payments incur income-tax liabilities for the owners that collect them, even though profits that generated the cash to pay the dividends were already taxed at the corporate level.