Role and Function of Profit and Taxes in Business

A Sole Proprietorship is defined as:

• A business owned and operated by one person

• A partnership between two or more individuals

• A corporation with multiple shareholders

What is the taxation of a Sole Proprietorship?

• Owner's claim business taxes on their own personal income tax return.

• They are reported to the IRS directly.

• They are reported on a partnership tax return.

What is an advantage of a Sole Proprietorship?

• Simple to set up and operate

• Shared decision making

• Double taxation

What is one disadvantage of a Sole Proprietorship?

• Unlimited liability

• Complete control

• Tax benefits

A Partnership is defined as:

• a business in which two or more individuals manage and operate the business.

• a type of business entity that is owned and run by one individual.

• a legal entity that is separate and distinct from its owners.

What is the taxation of a Partnership?

• Equally among partners

• Profits and losses are passed through to the partners' personal income tax returns.

• Randomly

What is one advantage of a Partnership?

• Easy to form, with the ability to combine capital

  (money), experience, and/or abilities

• No need for a formal agreement

• Complete control by one partner

What is one disadvantage of a Partnership?

• Potential for disagreements between partners

• Easy to form

• Limited resources

A Limited Liability Company (LLC) is defined as:

• A hybrid structure, gives owners the advantages of corporations and either sole proprietorships

  or partnerships.

• A corporation that is taxed separately from its owners.

• A sole proprietorship with limited liability protection.

What is the taxation of an LLC?

• Taxes are claimed only on individual members personal income tax return

• Profits and losses are retained within the LLC and taxed at the corporate level.

• Profits are passed through to the owners, but losses are retained within the LLC.