Lit1 Task 1 Essay

2381 words - 10 pages

Task 1 Part A
• LIABILITY –From a legal point of view there is no distinction between the assets of the business owner and the business itself. Business assets can be used to pay personal debts and personal assets can be used to pay business debts as sole proprietorships are subject to unlimited liability.
• INCOME TAXES – All income generated through sole proprietorships is considered ordinary personal income tax to the owner and is subject to the highest rate of taxation by the Internal Revenue Service.
• LONGEVITY/CONTINUITY – Because the business owner and the business are the same legal entity, the business will dissolve upon the ...view middle of the document...

This is the same tax situation as a sole proprietorship.
• LONGEVITY/CONTINUITY – If there are more than two partners in the general partnership, the partnership can be dissolved and reformed without including all the original partners. If there are only two partners the partnership can be dissolved when the partnership agreement ends.
• CONTROL – Partners generally have an equal voice in all business decisions unless there is an agreement between the partners to have one partner have more control of business decisions than the other partner(s).
• PROFIT RETENTION – Profits generated by the business are shared equally between the partners unless there is a partnership agreement to divide the profits in a specific percentage.
• LOCATION – General partnerships are subject to state statutory laws that govern businesses including sole proprietorships. The partnership must be registered with the Office of the Secretary of State for each state that it operates in.
• CONVENIENCE/BURDEN – Partnerships may file information returns to report the financial status of the partnership and the distribution of profits and losses among the partners. Also partners can be financially liable for any misdeeds of their partners whether they are aware of the actions or not.

• LIABILITY – The general partner has unlimited liability for any business debts and obligations while the limited partner’s liability is limited to the amount they have invested in the business. When the partnership is dissolved the limited partner is paid before the general partner but not before the business debts and obligations are satisfied.
• INCOME TAXES – Limited partnerships are taxed the same as general partnerships and sole proprietorships. The partners pay the higher rate of personal income tax instead of lower corporate tax rates.
• LONGEVITY/CONTINUITY – The limited partnership is dissolved if the general partner dies however if the limited partner dies, the limited partners estate is entitled to their portion of the assets and profits.
• CONTROL – In a limited partnerships the limited partner cannot have any involvement in the day-to-day running of the business. The general partner makes all the business decisions like the owner of a sole proprietorship.
• PROFIT RETENTION – Profits from the business are equally distributed to both the general and limited partners unless a different percentage is specified in the partnership agreement.
• LOCATION – Limited partnerships have to comply with the individual state laws in which they are formed. They must also register with the Office of the Secretary of State.
• CONVENIENCE/BURDEN – The limited partner can only lose as much as they invest which means that the majority of the personal assets are protected in the case the business is unable to meet their obligations. Limited partnerships are close...

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