One main disadvantage of c cooperative is in regard

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One main disadvantage of C-Cooperative is in regard to obtaining the capital through the investors of the business. The reason is that the C-Cooperative may have to face slower the cashflow since a member’s wish to contribute to the cooperative will totally depend upon the services and products offered by the cooperative. Smaller investors are attracted with the idea that they get a right to vote, but a member who wants to make a larger share of investment will
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FORMS OF BUSINESS ORGANIZATION 8 look for other opportunities as more investment certainly does not mean more right to vote for any member. S-Cooperative A S-Cooperative is a corporation that is created with the help of election of local tax authority, for example Internal Revenue Service (IRS). A domestic corporation that is eligible can avoid taxation to shareholders as well as to the corporation known as double taxation through becoming a S-Cooperative. The difference between S-Cooperative and C-Cooperative is that the profits and losses that are incurred can be passed through to the personal tax return of individuals. Hence, the business is not taxed itself and only the shareholders are taxed. The advantages and disadvantages of S-Cooperative are discussed below: One of the most important advantages of S-Cooperative is that it offers the benefit of tax savings for the business itself as well as the shareholders. The shareholder who is an employee as well of the S-Cooperative is subject to employment tax and the remaining earning is given to the owner in the form of distribution which can be taxed but at at a lower rate. The second advantage is that the business can lead an independent life which is separate from that of its shareholders. This means if the shareholder intends to leave the company or sell his shares, it does not affect the continuity of the business organization (Bizfilings, 2012). The disadvantage of S-Cooperation is that the operational processes are strict as it operates as a separate business entity and requires that proper shareholders as well as directors meetings are scheduled and held, the minutes of the meetings are well-maintained, the legalities are followed and the record is well-maintained. Another disadvantage is that it is important that the shareholders must be compensated properly and especially the ones that work as an employee as well and strict check and balance is kept on the company (Bizfilings, 2012).
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FORMS OF BUSINESS ORGANIZATION 9 Limited Liability Company The LLC is considered to follow a hybrid type of structure in the business law as it has the operational flexibility and the tax relief and efficiencies as that of a partnership whereas the features are of a corporation. The owners are known as the members. As the shareholders are taxed in the corporation, the limited liability company is not taxed as a separated business structure and instead all the losses or profits incurred are passed through to each members of the limited liability company. The profitability and losses of the company are reported in personal
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