Sold: Income Statement and Profit Sharing Essay

Submitted By ckenhuang
Words: 409
Pages: 2

Table of Contents The three types of business organisation: 2 Sole proprietor: 2 Background: 2 Characteristics: 2 Partnership: 4 Background: 4 Characteristics: 4 Company: 6 Background: 6 Characteristics: 6 Recommendation: 8 Reports: 10 Worksheet: 10 Income statements 11 Balance Sheet 12 Cash flow statement: 13 Reference lists: 14

I would recommend Christina and David to start the business with partnership because there are only two owners and fit into the structure of partnership. Additionally, partnership is simple and inexpensive to set up and both partners can fully control over the business and entitle to all profit generate by the business. They can shut down the business anytime they want if they believe the business is not doing well. Furthermore, from the income statement, it shows the business generate $8,905 before tax profit, which means that Christina and David only need to pay 5% of every one dollar they earned. This is a huge tax saving compare with the company tax (30%). It is also a very flexible with ways they generate financial reports which will save time and money. However, they will need to consider the following factors; they will be fully liable with the debt, loss incurred by the business. They are responsible to any legal action taken against the business and mostly importantly they are unable to raise fund from public.
In the case of the profit sharing, as I mentioned in the report, Christina and David should set up agreements to clearly state how they will distribute the profit of business. The agreement should record details of the partnership, which should include name of partners,