Discussing Formation About Types Of Business Comparison

Types of Business Comparison
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Types of Business Comparison
The main reason for doing business for most people is generating profit. However, businesses come in different types and different forms of ownership with each having its own advantages and disadvantages. For instance, certain businesses are easy to form as they involve few legal requirements while others require a lot of legal documents making its formation complex. Understanding formation requirements, merits and demerits (especially with regard to liability issues and taxation) of each business type is important for an entrepreneur in making a good choice for a business type to choose when registering or forming a business.
There are many types of businesses. These include sole proprietorship, partnership, corporation (C Corp. and S corp.) and Limited Liability Company.
Sole Proprietorship
A sole proprietorship is a type of business owned by a single person. It is the easiest to form and less costly as few formalities are required. Essentially, the owner needs to acquire a business license and start operating (Khan, 2017). The license costs less than $100 in many cases, and this would be the only cost incurred during its formation. Also, taxation for a sole proprietorship is simple, and the sole proprietor can just pay the tax through a personal tax return (pass-through taxation) (Drexler, Black & Sparks, 2016). The business itself is not taxed separately. However, the biggest disadvantage with this kind of business is that it has unlimited liability meaning that the creditors can go after the owner's assets to recover their dues when the business fails.
Partnership
A partnership is a business type in which two or more people share management and profits from a business. There are two forms of partnership; general and limited. A general partnership is a simple form of partnership in which few formalities are involved in formation, and the owners take equal responsibility in management and paying debts. In limited partnership, there are general and limited partners. (Faisal, et al, 2015) Limited partners lack responsibility in management and debts while general partners carry the management and debts responsibilities. Forming a limited partnership require more complexities.
In general, partnership is advantageous to due to simplicity in tax payment since it applies for the ‘pass through' system in which each owner files the losses or profits shared through the personal tax return (Faisal, et al, 2015). The business is not taxed as separate entity. Also, limited members in limited partnership enjoy limited liability hence their assets cannot be used in paying creditors when business fails. However, for general partners, their assets have to be used to recover creditors' dues.
Corporation
Unlike sole proprietorship an...