Lit1 Task 310.1.2-01-06 Essay

1464 Words Apr 7th, 2013 6 Pages
LIT1 Task 310.1.2-01-06
Part A
Sole Proprietorship -
• LIABILITY – There is no separation between the individual and the business. As the owner and operator of a sole proprietorship, all of the profit and loss is the personal responsibility of the business owner creating unlimited liability.
• INCOME TAXES – As a sole proprietor all business income or losses must be reported as personal income tax. The business itself is not taxed separately.
• LONGEVITY/CONTINUITY – The sole proprietorship is defunct once the business owner dies, or quits.
• CONTROL – The business is controlled by the single business owner. The control cannot be passed to another person.
• PROFIT RETENTION – All profits are kept by the business owner.
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• CONTROL- Like in a C-Corp a board of directors is elected. The difference is though in an S-corporation shareholders have more direct influence over the company.
• PROFIT RETENTION- The company’s profit can be used in two ways. The profit can either be invested in the business or it will be paid out to the shareholders as dividends. Dividends are based upon on the shareholders stake.
• LOCATION - Location is irrelevant for the S-Corp since corporate tax is the same for all states.
• CONVENIENCE/BURDEN - An S-Corp has the benefit of pass through taxation to its shareholders. An S-Corp is limited to only 75 shareholders.
Limited Liability Company –
• LIABILITY - Like a corporation an LLC has the same liability protection. Members are not held personally liable for the company’s debts unless they have agreed to a personal guarantee.
• INCOME TAXES- Like an S-Corp the income of a Limited Liability Company taxes are passed through. The company itself does not pay income taxes. The members of the LLC pay the income taxes as their personal income taxes.
• LONGEVITY - THE LLC can is determined by having one member with a 50% or greater share. If this member chooses to leave the company the LLC will no longer exist. This is not case with members who have less than a 50% stake in the LLC.
• CONTROL - The LLC can be controlled in two ways. Member Manager or Manager Managed. Under Manager-Managed the LLC is managed under the

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