Accounting Formulas

Accounting Formulas

Business Structure



The purpose of this paper is to identify the different business structures and explain the advantages and disadvantages of each. Each business structure has their own legal and tax implications. It is important to understand the variances of each structure to operate a business. The different structures are the following: General Corporation, S corporation, Limited Liability Corporation, sole proprietorship, and partnership.

Corporations are the most complex business structures. There are three types; general corporations, s. corporations, and limited liability corporations. “Corporations are a separate legal entity owned by stockholders” (Films Media Group, 2011). The advantages of corporations are the limited liability, the advantage to produce capital, and corporate tax rates. S corporations are usually better for small businesses that want the tax savings, but they have a stricter operational process. An LLC is not a corporation but has some of the same advantages of an S corporation with fewer restrictions. LLCs are becoming more popular because they are easier to obtain. A famous disadvantage of corporations is double taxation; which occurs when the corporation shows profits and when shareholders are paid. Corporations are also costly and highly regulated.

Sole Proprietorship
Sole proprietorships can be an economical way to start a business. This is business structure that owners prefer when they want absolute authority. An immense disadvantage is that the business owner is personally liable for everything. Another advantage can be the easy tax preparation and a considerable disadvantage is the challenges to raise money or the heavy burden for succeeding and failing when having complete control of the...

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