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would have more formal requirements than the general and joint venture partnerships. The benefits to create a partnership business is to have no formalities to become a general partnershipwhich means no obligation to have writing agreement partnership form. However, would not be such a bad recommendation to have one for a peace of mind in the case a partner decides to leavethe company. Or the agreement on how partners should proceed when it comes to business decision making, profits and losses split and limited control that each partner must keep. As partner Bob and Mandy would have to share all expenses and ownership obligation and all losses & profits would flows through their personal income tax. They would have not worries on being taxed at a partnership level when filing their own taxes. Under section 704(a) Code make available all the information on income, gains, loses, deductions or credits that could be assigned to partners based on the partnership agreement. This allocation of income and loss could have a significant economic effect. Which mean, each partner will have the decision on to allocate their income and losses as convenience for their individual tax liability. Some of the disadvantages of forming a partnership are that partners will be individually accountable for business debts and will also be responsible for the actions of other “partners limited life of a partnership” [Par17]. Bob and Mandy will report all business profits and losses on form 1065 as according to IRS tax code. In the case one of the partner leaves the partnership can close the shared investment decision making, which means Bob or Mandy would not to have full control of the situation, leading to dissimilarities of the partnership. The next business structure form that the client could decide to go for is known as the C corporation. This corporation is a separate legal entity which is set up under state law to shield
8Aneley Azcuy-Pita01/21/2018owner assets from creditor claims. It is one of the oldest form of business type in the country andmost common one. It is important before deciding to with this business structure to get a little bitfamiliar with this business model. The benefit of such corporation it’s how independent it is fromits shareholders. Which give the owners a fantastic protection from being personally liable for the business’s liabilities and obligations. However, shareholders would not be well protected from corporation’s liabilities if corporate funds are misused.Corporate entity can benefit on shareholders decision on suing on the corporate’s behalf.In case, corporation directors and management failed to imply their authority make decision judgment for the corporation best interest. Both Mr. Jones and Mandy as two main shareholders will still be treated as employees when it comes for the business to file taxes. The tax form for C Corporation is form 1120. Normally, employees will receive a W-2 for their personal income tax filing. Good benefit for this business structure is that any net operating losses will be carried back 20 years. Few disadvantages for this C corporation will be double taxation and complicated
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Business, Corporation, Taxation in the United States