Week 1 Lecture Notes

Week 1 Lecture Notes - Northeastern University Online...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Northeastern University Online College of Professional Studies TCM 6040: Accounting for Tech Startups Week 1 Lecture Notes When you open a new startup business, the first step is determining the type of business or the organizational form of your business. Normally, you will have three choices – namely, sole proprietorship, partnership, and corporation. Before selecting the organizational form, you need to know the advantages and disadvantages of each organizational form. The following information is intended to help you choose the right organizational form for your startup company. Sole Proprietorship · Sole proprietorships are owned by one individual, are relatively inexpensive to form, and are not treated legally as separate from their owners. When we say one individual, we need also to remember that the spouse is assumed to be the owner of half of the business in most states, especially in the community property states. Thus, all profits or losses become part of the taxable income to the owner who is also responsible personally for all debts of the business. · A sole proprietorship is simple to start and all it requires is registration with the county clerk for a nominal fee. Normally, there are no legal costs involved in forming proprietorships. · The major disadvantage of a sole proprietorship is that the owner is not protected from the liabilities of the business like a corporation. If an owner is not able to pay his/her business liabilities, personal possessions will be used to satisfy the business debts. Partnership · A partnership is legally similar to a proprietorship, but owned by two or more individuals through a verbal or written partnership agreement. · The cost of forming a partnership is more than forming a sole proprietorship, but is not prohibitive like a corporation. · Profits and losses are divided among the partners at the end of an accounting period based on percentages specified in the partnership agreement. · One of the disadvantage of a partnership form of business is that all the partners in the partnership are equally and severally liable for the debts of the partnership. That means creditors can go after any one of the partners to recovers amounts owed to them. Corporation · A corporation is a separate legal entity that issues shares of stock to investors (stockholders) and is more costly to establish since it may involve some legal costs. Unlike a sole proprietorship, a corporation is a legal entity that can exist apart from its owners or
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Northeastern University Online College of Professional Studies TCM 6040: Accounting for Tech Startups stockholders. Private corporations issue stocks to a few individuals while public corporations issue stocks in the stock market. · Most large corporations are publicly traded and are regulated by the Securities and
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 5

Week 1 Lecture Notes - Northeastern University Online...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online