Question

Discussion- Business Entity

Directions: (You must post before you can see other postings.)

1. Read the Instructor Notes on Business Entity. Be mindful of all the unique distinctions between the entities. (ie.. formation, taxation. Profits and loss, etc.) Incorporate the notes into your answers.
2. Identify legal and regulatory issues to be considered in creating/modifying this business.
3. Identify and make clear reason, based on the facts in the situation, why you made that choice?
4. Keep your posting limited to 300-500 words!

What business entity choice (Sole proprietorship, Corp., Partnership, etc.) would you make based on liability from a lawsuit in order to protect the owners/founders of the business and why?

Business Situation   No, 6

You are a single owner service provider or retail establishments, such as a designer, building contractor, or clothing boutique owner, looking to form a new business with minimal capital investment. You are concerned about personal liability for business debts, want a business that does not require excessive accounting and professional fees, is relatively low maintenance in terms of annual documentation and filings, yet to the outside world looks and acts like a legitimate, professionally organized business entity that stands apart from you as the owner. You are not sure at this time whether bringing in outside investors to help build your business faster is a good idea, but you have not ruled it out. To make it worse, you owe the IRS 20,000 dollars for the past two years' income.

In this hypothetical, your business started off with two employees and has estimated annual earnings under $500,000.

Which one of the business entities should you choose to take care of your present business situations? Explain your reasons for making this choice. Remember to reply to at least two classmates. Your response should be detailed.

Answer 1

Answer:

For the given scenario it would be advisable to form a single-member limited liability company as this gives the dual advantage. LLC gives limited liability like corporations and pass-through taxation as a proprietorship. This form of business does have many papers or filing requirements like the corporations and will also stand apart from the owner. As the owner would not be personally liable for the debt and liabilities like in case of proprietorship and partnership firms. later on, more members can be added into the LLC form of business, as there is no restriction on the number of members that can be in an LLC form of registered business entity.