BUISENESS MANAGEMENT
BUSINESS STRUCTURE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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(i) Whether the owner will be the only contributor of capital to the entity;
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(ii) The degree of risk that the owner(s) are willing to take with the entityi.e. whether the entity should have limited or unlimited liability;
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(iii) The potential for growth of the entity in the future;
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(iv) Issues of taxation i.e. sole trader/partnership forms do not pay tax on the entity’s profits. The owner’s will include their share of the entity profit in their individual taxation returns.
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Detailed explanation-1: -The most common forms of business are the sole proprietorship, partnership, corporation, and S corporation. A Limited Liability Company (LLC) is a business structure allowed by state statute.
Detailed explanation-2: -Common examples of business structures include corporations, partnerships, holding companies, non-profits, subsidiaries and limited-liability companies.
Detailed explanation-3: -A sole trader, also known as a sole proprietorship, is a simple business structure in which one individual runs and owns the entire business. A sole trader is entitled to keep all profits after taxes have been deducted but is also liable for all losses the business incurs.
Detailed explanation-4: -Sole traders have unlimited liability. This means that unlike the owners of a limited company, a sole trader is personally liable for their business’ debts. This is because the sole trader is their business, rather than the business having any legal identity in its own right.