LIT1 Task 1 Essay

Words: 1775
Pages: 8

LIT1 Task 1A

Sole proprietorship: Is the simplest and most common business structure. There is no legal distinction between the proprietor and the business, which means it is autonomous. You are entitled to all profits and responsible for all your business's losses and liabilities.
Liability- This falls directly on the owner. All debts, liabilities and losses fall on the owner. The owner's assets can be used to alleviate the business's debt.
Income taxes- All income generated through a sole proprietorship is taxed by the Internal Revenue Service. This is reported on the owner's personal tax return.
Longevity/Continuity- A sole proprietorship exits only as long as the owner is alive or until the owner decides to
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Control- Control is shared by the company's shareholders and a board of directors. A annual meeting has to be held along with records of said meetings.
Profit retention- Profit is given to the shareholders through dividends.
Location- There are several state and federal filings for the location of a corporation.
Convenience/Burden- With a corporation funding and financing can come easily by selling stock or credit. A corporation also has a long life span. A downfall is that it is very complicated to run a corporation and there are a lot more expenses involved. Also has a double taxation.

S-Corporation: This is similar to a C-corporation in profit and liability. The differences are that there is no dual taxation but they must meet certain requirements. A s-corporation can only have a certain number of shareholders and can have only one class of stock.
Liability- Similar to a C-corp, the corporation is liable for debts and obligations.
Income taxes- The owners and shareholders pay taxes on the income produced by the business.
Longevity/Continuity- Same as a C-corp, a S-corp can have a long life span and see many different executives.
Control- Shareholders select a board of directors and they elect officers to run the company. Shareholders of a S-corp must be United States citizens.
Profit retention- Profit is divided up to