Business Planning And Accounting: Case Study

Decent Essays
DATE: September 17, 2016
TO: Gloria Smithson
FROM: Izabela Kaczor – Kaczor Business Planning and Accounting
RE: Business entities: recommendations for a start-up company

Thank you for the opportunity to work with you. Selecting the appropriate business entity requires a careful balancing of tax, legal and other considerations. As requested, I have analyzed the pros and cons of few different types of business entities and evaluated which business type would be the most appropriate for you and your husband.
There are many legal forms of business, from the simplest – Sole Proprietorship, Partnerships-General and Limited, Limited Liability Company to Corporation. The best possible options that would serve your needs are as follow: General
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It can be privately owned or a public company with shares trading on the stock market. As an entity separate from its ownership, a corporation can buy and sell property, sue and be sued, etc. As a separate entity, a corporation provides limited liability for its owners, who are not liable for its debts. It also means that the owner 's personal property is safe from a lawsuit against the corporation ((2014, October 27)).

Pros:
Owners have limited personal liability for business debts
Benefits can be deducted as a business expenses
Lower overall tax rate
Owners can split corporate profits among each other and corporation
Cons:
More complicated
Costly
Difficult to maintain
Complicated to run

Limited Liability Corporation
The limited liability company (LLC) is a legal business entity created under state law. The LLC offers the benefit of limited liability while also providing for pass-through of taxable income, losses and credits to the LLC “member” (Choice of Business Entity. (2015))
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Selecting one of the three legal forms depends on many factors such as tax issues or legal responsibility. For example, if you expect significant revenues in the first year of operation, or anticipate financial losses. If you expect the revenue to grow, LLC may have more advantages, but if you want to accumulate financial losses and write them off of in the future, a Corporation may be the best solution.

Because you are very concerned about insulating yourself and and family from personal liability, and you want your business to grow steadily and possibly expand globally, Corporation entity would be the best option for your future business. This business entity will be protecting you and your husband from legal responsibilities, lowering your tax rate, and eventually helping you expand globally as a serious corporation.

“Business owners need to understand that taxes should not drive the business decision. They should not be ignored, but owners need to focus on what is good for the long-term success of the company” (Hopson, J. F., & Hopson, P. D.

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