Select a publicly traded company and a publicly traded, largepartnership. Analyze how they are...

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Accounting

Select a publicly traded company and a publicly traded, largepartnership. Analyze how they are treated for tax purposes.Describe the differences in taxation of their income, formation,dissolution, and liquidation, as well as the responsibilities bornetowards creditors and taxing authorities by partners, shareholders,partnerships, and corporations.
As a CPA in public practice, which type of business organizationwould you advise a client to adopt among sole proprietorships,various forms of partnerships, and various forms ofcorporations?
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The type of business entity you choose will depend on three primary factors liability taxation and recordkeeping Heres a quick look at the differences between the most common forms of business entities A sole proprietorship is the most common form of business organization Its easy to form and offers complete managerial control to the owner However the owner is also personally liable for all financial obligations of the business A partnership involves two or more people who agree to share in the profits or losses of a business A primary advantage is that the partnership does not bear the tax burden of profits or the benefit of lossesprofits or losses are passed through to partners to report on their individual income tax returns A primary disadvantage is liabilityeach partner is personally liable for the financial obligations of the business A corporation is a legal entity that is created to conduct business The corporation becomes an entityseparate from those who founded itthat handles the responsibilities of the organization Like a person the corporation can be taxed and can be held legally liable for its actions The corporation can also make a profit The key benefit of corporate status is the avoidance of personal liability The primary disadvantage is the cost to form a corporation and the extensive recordkeeping thats required While double taxation is sometimes mentioned as a drawback to incorporation the S corporation or Subchapter corporation a popular variation of the regular C corporation avoids this situation by allowing income or losses to be passed through on individual tax returns similar to a partnership A hybrid form of partnership the limited liability company LLC is gaining in popularity because it allows owners to take advantage of the benefits of both the corporation and partnership forms of business The advantages of this business format are that profits and losses can be passed through to owners without taxation of the business itself while owners are shielded from personal liability Selecting a Business Entity When making a decision about the type of business to form there are several criteria you need to evaluate Kalish and EnviroTech coowner John Berthold focused on the following areas when they chose the business format for their company 1 Legal liability To what extent does the owner need to be insulated from legal liability This was a consideration for EnviroTech says Kalish He and Berthold had a hefty investment in equipment and the contracts they work on are substantial They didnt want to take on personal liability for potential losses associated with the business You need to consider whether your business lends itself to potential liability and if so if you can personally afford the risk of that liability Kalish says If you cant a sole proprietorship or partnership may not be the best way to go Carol Baker is the owner of The Company Corporation a firm based in Wilmington Delaware that offers incorporation services She points to the protection of personal assets as the numberone reason our clients incorporate In case of a lawsuit or judgment against your business no one can seize your personal See Answer

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