Guia de Estudio 1resumen
Guia de Estudio 1resumen
Guia de Estudio 1resumen
Sole Proprietorship
A Sole Proprietorship consists of one individual doing business. Sole
Proprietorships are the most numerous form of business organization in the
United States, however they account for little in the way of aggregate business
receipts.
Advantages
Ease of formation and dissolution. Establishing a sole
proprietorship can be as simple as printing up business cards or
hanging a sign announcing the business. Taking work as a
contract carpenter or freelance photographer, for example, can
establish a sole proprietorship. Likewise, a sole proprietorship is
equally easy to dissolve.
Typically, there are low start-up costs and low operational
overhead.
Ownership of all profits.
Sole Proprietorships are typically subject to fewer regulations.
No corporate income taxes. Any income realized by a sole
proprietorship is declared on the owner's individual income tax
return.
Disadvantages
Unlimited liability. Owners who organize their business as a sole
proprietorship are personally responsible for the obligations of
the business, including actions of any employee representing
the business.
Limited life. In most cases, if a business owner dies, the
business dies as well.
It may be difficult for an individual to raise capital. It's common
for funding to be in the form of personal savings or personal
loans.
The most daunting disadvantage of organizing as a sole proprietorship is the
aspect of unlimited liability. An advantage of a sole proprietorship is filing
taxes as an individual rather than paying corporate tax rates. Some hybrid
forms of business organization may be employed to take advantage of limited
liability and lower tax rates for those businesses that meet the requirements.
These include S Corporations, and Limited Liability Companies (LLC's). Where
S-Corps are a Federal Entity, LLC's are regulated by the various states. LLC's
give the option for profits from the business to pass through to the owner's
individual income tax return.
Partnership
A Partnership consists of two or more individuals in business together.
Partnerships may be as small as mom and pop type operations, or as large as
some of the big legal or accounting firms that may have dozens of partners.
There are different types of partnerships—general partnership, limited
partnership, and limited liability partnership—the basic differences stemming
around the degree of personal liability and management control.
Advantages
Synergy. There is clear potential for the enhancement of value
resulting from two or more individuals combining strengths.
Partnerships are relatively easy to form, however, considerable
thought should be put into developing a partnership agreement
at the point of formation.
Partnerships may be subject to fewer regulations than
corporations.
There is stronger potential of access to greater amounts of
capital.
No corporate income taxes. Partnerships declare income by
filing a partnership income tax return. Yet the partnership pays
no taxes when this partnership tax return is filed. Rather, the
individual partners declare their pro-rata share of the net
income of the partnership on their individual income tax returns
and pay taxes at the individual income tax rate.
Disadvantages
Unlimited liability. General partners are individually responsible
for the obligations of the business, creating personal risk.
Limited life. A partnership may end upon the withdrawal or
death of a partner.
There is a real possibility of disputes or conflicts between
partners which could lead to dissolving the partnership. This
scenario enforces the need of a partnership agreement.
As pointed out, unlimited liability exists for partnerships just as for sole
proprietorships. One way to alleviate this risk is through Limited Liability
Partnerships (LLP's). As with LLC's, LLP's may offer some tax advantages while
providing some risk protection for owners.
Corporation
Corporations are probably the dominant form of business organization in the
United States. Although fewer in number, corporations account for the lion's
share of aggregate business receipts in the U.S. economy. A corporation is a
legal entity doing business, and is distinct from the individuals within the
entity. Public corporations are owned by shareholders who elect a board of
directors to oversee primary responsibilities. Along with standard, for-profit
corporations, there are charitable, not-for-profit corporations.
Advantages
Unlimited commercial life. The corporation is an entity of its
own and does not dissolve when ownership changes.
Greater flexibility in raising capital through the sale of stock.
Ease of transferring ownership by selling stock.
Limited liability. This limited liability is probably the biggest
advantage to organizing as a corporation. Individual owners in
corporations have limits on their personal liability. Even if a
corporation is sued for billions of dollars, individual
shareholder's liability is generally limited to the value of their
own stock in the corporation.
Disadvantages
Regulatory restrictions. Corporations are typically more closely
monitored by governmental agencies, including federal, state,
and local. Complying with regulations can be costly.
Higher organizational and operational costs. Corporations have
to file articles of incorporation with the appropriate state
authorities. These legal and clerical expenses, along with other
recurring operational expenses, can contribute to budgetary
challenges.
Double taxation. The possibility of double taxation arises when
companies declare and pay taxes on the net income of the
corporation, which they pay through their corporate income tax
returns. If the corporation also pays out dividends to individual
shareholders, those shareholders must declare that dividend
income as personal income and pay taxes at the individual
income tax rates. Thus, the possibility of double taxat
(a) Owners:
Owners are the persons who contribute capital in the business and
ultimately responsible to bear all risk associated with the business.
They are interested in the profitability and solvency of the
business concern. In small business enterprises, owners control
the affairs of the business directly, but in medium or large
enterprises these control are exercised by the managers.
(b) Management:
Management may consist of Board of Directors, Managers and
other officers of the business enterprise. They need the accounting
information on cost of sales, profitability and solvency of the
business enterprise for planning, controlling and decision making.
Management is interested in assessing the capacity of the business
to earn profits in future.
(d) Customers:
ADVERTISEMENTS:
(e) Competitors:
For knowing the relative strengths and weaknesses of their
competitors and for strategic purposes, business enterprises
examine and analyse the financial statements of other business
enterprises, their credit policies and debt collecting procedures. In
this connection, business enterprises regularly keep a constant
touch with the accounting information of their competitors.
(i) Society:
Society is that part of business environment in which business
enterprise is born and grows. Business enterprise helps the society
by protecting environment, generating employment, providing
residential accommodation and low cost education to the weaker
sections of the society etc. In this connection accounting
information helps the society to know the contribution made by
the business enterprise for the upliftment of society.
(j) Others:
Some other parties may also be interested to analyse the financial
statements of an enterprise such as stock exchange authorities,
researchers, economists, etc. for various reasons such as
determining the price of securities, decisions for buying or selling
of securities, knowing the contribution of public or private sector
in the gross national product etc.