Business Ownership

Paper Summary:

This paper examines how choosing the optimal form of business organization is a very crucial decision and how there are various factors that are to be considered in making this decision. It looks at how some of these factors include profit sharing, liability issues, taxation, etc., and in particular, how the issue of liability is important and can be the major decision factor in choosing an ownership form. The three basic types of business organizations include sole proprietorship, partnership, and corporation. It analyzes the pros and cons of each type of business ownership, as well as the various steps needed to fund the expansion of a business by choosing an optimal form of ownership.

From the Paper:

"Corporations also have disadvantages compared to proprietorships and partnerships when it comes to taxation. Since the corporation and the stockholders are considered to be two different legal entities, they face the problem of double taxation, meaning that the owners are taxed twice. If an owner of a corporation works for the corporation, he is paid a salary, and possibly bonuses, like any other employee. He pays taxes on this income, as do regular employees, reporting and paying the tax on his personal tax return. The corporation also pays taxes on whatever profits are left in the businesses after paying out all salaries, bonuses, overhead and other expenses. Another issue that some might take as a disadvantage to corporations is that the stockholders are not actually owners considering the fact that they are not the decision makers, rather the management is the one that owns the corporation as they have all the decision making power."

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