describing business structure and financial statements

Purpose of Assignment
The purpose of this assignment is to help students gain a better understanding of the importance of the appropriate legal business categories and financial statements as a key management tool for making decisions.

Assignment Steps

Develop a 1,050-word evaluation describing business structure and financial statements, including the following:
* Identify and describe the legal categories of a business organization contrasting tax-related advantages and disadvantages.
* Next, using your entrepreneur skills, consider starting your own business. What business structure would you choose and why?
* Discuss financial statements for the chosen business structure, then explain with specific examples from the University Library, how these would help you make decisions about your business. /

Cite a minimum of two peer-reviewed references. Please cite each reference. /

Format your paper consistent with APA guidelines. /

Attached is Chapters 1, 2, 8 and 12. PDFs /

Attached is the grading guide for this assignment.

Sample Paper

Business Structure and Financial Statements

Anyone can open a business, but responsibly doing so is vital to all parties involved. One must understand what business structure to use to open the business. Choosing a business structure is a guide to the advantages and disadvantages of the chosen structure, and how the structure can operate legally. Also, financial statements also known as record keeping is necessary for an organization to track their assets, financial ability of the company, income and more.

Legal Categories Advantages and Disadvantages

Sole Proprietorship, Partnership, and Corporations are all legal categories of a business contrasting tax related advantages and disadvantages. Sole Proprietorship is a business owned and managed by an individual. This is a less complicated way to start a business. There is no extensive paperwork involved; the owner has no one to answer to, and easy to maintain. The sole owner makes all the decisions and earns all the profit. The advantages of the sole tax are that the taxes are simple. The owner and business are looked at as “one” and taxes are paid through

the owner’s personal taxes. The owner is taxed on the income the business brings in and whatever else is included in the owner’s taxes. The disadvantage is the owner is responsible for all fiscal matters such as self-employment tax. Self-employment tax is federal, state, social security and medical taxes.

The partnership is owned by two or more people. The group will decide their role in the business. The process can be simple depending on those involved. The partners should consider the facts such as who and how much is invested, who will run the business, who will and should be included in decision-making. Some may decide to invest only wanting a return on the profit while another may want to run the business. Also, all partners may or may not own the same percentage of the company. The partners may decide it is better to have an attorney go over and

prepare the contracts for the business. Same as sole proprietorship the taxes are simple and filed with the owner’s personal taxes. The tax disadvantage of a partnership is the tax rates are considered personal earnings which mean the taxes are higher than corporate tax rates and self- employment taxes must be paid on the profits.

Corporations are the most complicated business to start. There are many owners called shareholders. Unlike sole and partnership companies require a federal tax identification number because the company is being tracked separately from the proprietor’s tax. The tax advantage is business taxes are lower than sole and partnership structures. Taxes are filed separately from its shareholders, and taxes are only paid on profit. The tax disadvantage is there is the possibility the corporation may be taxed twice. The company is first taxed on the profit and the second when

the funds are divided in dividends amongst the shareholders.