Forms of Business Entities

Business Structure
Student’s Name
Institutional Affiliation
Business Structure
Various choices are made when an individual or group of individuals are planning to start a business, among the most important choice that needs to made is choosing the legal structure the business is set to take. This choice does not only impact how the tax issues will be addressed, but also the amount of paperwork that needs to be done, individual liabilities as well as the amount of capital required. Alex, Bill, Carl and Devon have inherited a business from their deceased Dad, which was ran as a sole proprietorship entity. None of the sons were involved in the operations of the business, but instead their cousin Xavier was involved. Because they do not know how to run the farm, Xavier suggests to continue running the business and all sons agree to that. For easy running of the farm, they want to form a business entity under which it will be run. The conversion of the farm into a business entity depends on individual circumstances of the business owners. This is not an easy decision to made lightly or be made without critical analysis and counsel from experts. However, in order to make the right choice, all business entities should be analyzed and one should be chosen based on its merits and consideration of the individual circumstances of the business owners.
Forms of Business Entities
There are various business entities that business owners can choose from but the decision made depends on three important attributes: Taxation, record keeping and liability (Cassim et al,, 2012). However, in Alex, Bill, Carl, Devon and Xavier’s case, we will consider the most common types of business.
* Sole proprietorship. This is the most common type of business entity. Its formation is easy and provides the owners with a full managerial control opportunity over the business. As the name suggests, it is a business organization that is owned by a single individual. Besides giving the owner complete control of the business, it is simple to form (Mallor, Barnes, Bowers & Langvardt, 2012). Its setup simplicity and tax filling is the reason why it is the most common and preferred business structure. After being established, tax filling is done through the owner’s personal taxes. However, it has serious tax limitations and the tax rates are higher than for corporate entities. In addition, some of the employee benefits are not deductible. The bottom line, the owner of the business assumes complete liability of the organization.
* Partnership. This form consists of several individuals who have agreed to share returns from the business (Mallor, Barnes, Bowers & Langvardt, 2012). Its primary advantage over other forms of business entities is that it is not taxable. The tax liability is passed to the partners’ individual income tax returns. However, each partner is liable to all debts of the organization.
* Corporations. This is a legal entity that is separate from the founders and those who controls it (Cooper et al., 2016). It is taxable like persons and is legally liable for its actions. Additionally, it can make profits like people. Its advantage over other forms is the avoidance of personal liability. However, it requ...