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Acc 561 Week 2 Paper Four Types of Business




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Running Head Four Types of Business
University of Phoenix
An Entrepreneur is a person who forms and operates a business. Entrepreneurs
form and start companies by themselves, or with partners. Most of the time
companies which are started by entrepreneurs are relatively small in size, but some
grow into huge corporations, such as Microsoft which is owned by Bill Gates.
Entrepreneurs have four different options when starting a business, which include a
sole proprietorship, Partnership, limited liability company, and also a corporation.
Each form has its advantages and also disadvantages depending on what the type
of business is, and also what service it provides.
Sole Proprietorship
Sole Proprietorships are the simplest form of a business and the most common in
the USA. The sole proprietor is the one who does the work, basically they are the
business. Just like any other form of business, these companies have advantages
and also disadvantages. Some advantages include the fact that sole proprietorships
do not cost a lot to start up, and also the owner has complete control to make any
managerial decision he or she wants without having to consult with anyone. Other
advantages of sole proprietorships is that the owner gains and receives all of the
company’s profits without having to share with anyone, and this type of business can
be sold or transferred whenever the owner decides to retire, also not having to
consult with a partner. Disadvantages of a sole proprietorship include that the
owners usually provide all of the capital for the company using their own personal
funds, and also they are responsible personally for any debt that the business
obtains. As far as taxes are concerned, the profit or loss from your sole

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proprietorship business is reported annually with your personal income using the IRS
Schedule C form with your 1040 tax return. Businesses with less than $5,000 in
expenses may be able to use the simpler Schedule C-EZ form.
Partnerships are businesses in which two or more people decide to go into business
together. The people involved in the partnership are personally liable for the debts
and obligations of the partnership, whether they are personal debts or debts from a
third party. Also, partnerships can be formed with a very small amount of formality.
The main factor involved in a partnership is whether or not the involved parties share
the company’s profits. As far as taxes are concerned, partnerships do not pay federal
income taxes. On the other hand, the income losses of partnerships are reported on
each individuals’ personal income tax return, which is also known as flow through
taxation. Partnerships are required to file an information return. This is so that the
government can track whether or not the information filed is accurate or not.
Advantages of partnerships include that there is more than one person who is
coming up with capital to fund the business, and also partnerships allow ideas and
decisions to come from multiple brains instead of just one. Disadvantages of
partnerships include that involved partners are legally responsible together for any
debts or trouble that the company is liable for. Also, partnerships can involve many
disagreements because more than one brain is involved, and lastly profits have to be
shared which limits the amount of money a person could possibly make individually.
Corporations are the most powerful forms of business in the USA because they run
the economy and generate over 85% of the country’s business. Also, corporations
vary greatly in size because they can have anywhere from one owner to thousands
of owners, which are known as shareholders. Legally, corporations are organized
under state corporation law, and they have no personal liability. One of the main
advantages of a corporation is that it is very easy for this type of business to raise
capital. They do this by issuing stock to people known as shareholders, and these

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