Description
Davy Jones, a new tax client, walks into your office and informs you that he owns a charter fishing business. Jones is curious about the different legal structures (business forms) that are available for his business, including the sole proprietorship, partnership, S corporations, and C corporations.
Prepare a memorandum for Jones (and post it to the discussion forum) providing an overview of these 4 business forms.
Provide an explanation of the advantages and disadvantages of each business form, including a discussion on how the IRS collects income tax from each.
In your discussion on taxation, include the form names and numbers used for each business in reporting income to the Internal Revenue Service
Explanation & Answer
Researching information on legal structures for businesses was very insightful. Did you know that for most business owners, the decision comes down to how the owners will be taxed? 😲 Attached you will find details of each of the structures and tax requirements.Hope you find this helpful!Thanks for letting me help!
TO: Davis Jones
FROM: April Howell, Tax Associate
DATE: October 22, 2019
SUBJECT: Forms of Business Ownership
Forms of Business Ownership
Choosing the right business structure is one of the most important steps when launching a
business. The decision will impact everything from how the business is taxed to the degree of
liability assumed by the owner(s). As you may know, there are four main forms of business
ownership: sole proprietorship, partnership, limited liability company, and corporation. Every
business is different, so it’s important to understand the legal structures in order to make the
most appropriate choice for your business. The focus will be on sole proprietorships,
partnerships, and corporations.
Sole Proprietorship
When a business is owned by one person, it is typically referred to as a sole proprietorship.
This structure is the easiest form because it requires little-to-no formal registration with local
agencies. Additionally, sole proprietors maintain control over the business and its activities.
However, this means tha...
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