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Summary BUS607 Final Paper BUS607 Business Law for the Accountant BUS607 Week 6 Assignment Final Paper Business Entitys When starting a business, one of the most critical decisions the business owner must $7.49
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Summary BUS607 Final Paper BUS607 Business Law for the Accountant BUS607 Week 6 Assignment Final Paper Business Entitys When starting a business, one of the most critical decisions the business owner must
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BUS607 Final Paper BUS607 Business Law for the Accountant BUS607 Week 6 Assignment Final Paper Business Entitys When starting a business, one of the most critical decisions the business owner must make is determining which business organizat...
bus607 final paper bus607 business law for the accountant bus607 week 6 assignment final paper business entitys when starting a business
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BUS607
Business Law for the Accountant
BUS607
Week 6 Assignment Final Paper
Business Entity’s
When starting a business, one of the most critical decisions the business owner must
make is determining which business organization would better suit their business's needs.
Business owners must understand that the purpose of creating a business is to make a profit.
Choosing the right organization is extremely important to their future success. According to
Miller (2014), "In selecting an organizational form, the entrepreneur will consider a number of
factors, including (1) ease of creation, (2) the liability of the owners, (3) tax considerations, and
(4) the ability to raise capital". However, there are times when the business may be better suited
under a different organization. In this paper, I will discuss the advantages of switching to a
different organization, the responsibilities of the owners, their liabilities.
One of the simplest and common forms of business organizations is a sole proprietorship
entity. A sole proprietorship is "an unincorporated business with a single owner" where
everything, including the assets, liabilities, and income, all belong to the owner of the business
(Lowrey, 2005). If the owner doesn't create a separate business organization, a sole
proprietorship would be the only option because the owner represents and acts as the business.
Sole proprietorships are usually small businesses such as freelance writers, housekeepers, and
mechanical shops where their revenue is less than $1 million a year. The owner would only pay
, personal taxes on the business's income because they are the same. This means the company
would not be taxed separately from the owner. However, when switching to a different entity,
there are things the business owner must take into consideration. They must understand the
difference between the many other organization possibilities, Partnerships, Corporations, Limited
Liability Corporations, and limited partnerships. Each entity comes with their own rules
and regulations that must be considered before choosing a new organization.
A partnership is a business entity with two or more people agreeing, whether written,
oral, or implied by profit. All parties of the partnership are co-owners of the business; they share
responsibilities, controls of the business operations, all profits, and equal managerial rights.
According to Miller (2014), "A partnership agreement, also known as articles of partnership, can
include almost any terms that the parties wish, unless they are illegal or contrary to public policy
or statute." A limited partnership is where there is at least one general partner and one limited
partner in the partnership. The general partner handles all managerial duties and is liable for all
debt. The limited partner "contributes cash or other property and owns an interest in the firm but
is not involved in management responsibilities and is not personally liable for partnership debts
beyond the amount of his or her investment" but can forfeit their limited liability by engaging in
managerial duties (Miller, 2014). A corporation is a legal business entity that can have one or
more owners also known as shareholders. This entity operates under a name distinct from the
names of its owners. Lastly, A limited liability is composed of at least one owner. The company
possesses both the limited personal liability found in the corporate form and the favorable federal
tax treatment of the partnership form which is governed by statues depending on each state.
As a Certified Public Accountant (CPA) one of the most important determinations they
must make is helping a business owner make the best choice for their business. Accountants will
most likely request the business owner research the different business entities to see which one
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