Question

Prepare a chart that provides a summary description of following legal structures. Your chart should have the following five columns: Summary of Legal Structure, Advantages of Legal Structure, Disadvantages of Legal Structure, and Tax Consequences of Legal Structure.

Your chart should have a row for each of the following legal structures:

·         Sole Proprietorship

·         Partnership

·         Limited Partnership or LLC

·         C-Corporation

·         S-Corporation

Answer 1

The chart providing the Name of the legal structure, Summary of the legal structure, Advantages of the legal structure, Disadvantages of the legal structure and Tax Consequences of the legal structure is as follow:

NAME	SUMMARY(LegalStructure)	ADVANTAGES(Legal)	DISADVANTAGES(Legal)	TAX CONSEQUENCES
SOULPROPRIETOR	type of business owned and run by a single individual and the business entity is not different from that of the owner.	Privacy; Control over your business; Simplified tax auditing; Less Expensive; Lees reporting required.	Limited Financial Resources; A huge Competition; Difficulty is Raising Capital; Lack in Managerial Experience; Less capacity of the Individual.	All the taxes should be reported on the personal Income tax return because of the fact that the business is not considered different than the owner in Sole Proprietorship.
PARTNERSHIP	A legal arrangement where two individuals, companies or parties agree to work and cooperate on the mutual interest to run the business or the organisations together.	Easy to establish; Startup costs is low; More capital is available because of 2 individuals; High calibre in the employees; Greater borrowing Power	Unlimited liability in case the liability clause is not mentioned; Limited Access to Capital; Potential in differences and Conflicts; Profits must be shared; More difficult decision making	The partnership income is not tax as the separate entity, but the income of the individuals will be taxed upon on his/her share of partnership.
LIMITED PARTNERSHIP	A limited partnership is a form of partnership where some partners contribute the amount financially and are only liable to the amount they have invested in the business. They have limited liability not the unlimited one.	Tax Advantage; Unlimited Shareholders; Liability Protection for Limited Partners; Utilisation of Financial strengths of partners; Asset's Protection for Limited Partners.	Extensive Documents required; Less protection from Excessive Taxations; Lack of Distinction for General Partners; General Partners Liable for each others's Actions; General Partners' Assets are Unprotected.	The business pays no taxes on its income. The limited partners pay tax on their incomes. It is taxed individually for all general or limited partners.
C- CORPORATION	Any corporation which is taxed separately from its owners is a C-Corporation. The earning of the entity is considered different than that of the individuals associated with it.	Limited Liability for partners; Perpetual Succession of Business; Ease of Transferability; More Funds; Shareholders can Sue	Double Tax duties because business is different than owner; Complicated formalities; Expensive to Maintain; Many legal requirements; Time Consuming for establishment.	A legal entity which exists separate from its owners and is taxed separately. Subject to double taxations: Cooperations pay taxes on their incomes and shareholders pay taxes on earning.
S- CORPORATION	S corporation stands for small corporation where the business entity and the individual are treated same. It gives the shareholders all the benefits of the incorporation while being taxed like a partnership.	Protected assets because limited liability; No Double Taxes; Straightforward and easy Transfer of ownership; Heightened Credibility; Cash method of accounting	Formation and Ongoing Expenses; Legal barriers from having more than 10 shareholders; Owner/Employees holding more than 2% of company's share cannot have tax benefits; Limited to only one class of stock only; only the US residents can held the shares	S- coperations are not taxed an different entities. Instead, shareholders are taxed upon the level of income they received. Tax benefits could be provided only to a certain restricting amount like 2% of shares.