Reference no: EM132536230 , Length: 450

Question:

Jennifer and Jamie are starting a business and have asked you for advice about whether they should form a partnership, a corporation, or some other type of entity. Prepare a list of questions you would ask in helping them decide which type of entity they should choose and explain your reasons for asking each of the questions. Follow up by responding to your classmates posts discussing their questions and some of the advantages and disadvantages of each type of entity.

1stPeer answer: Respond this answer with above question highlighter parts.
- While you response : Follow up by responding to your classmates posts discussing their questions and some of the advantages and disadvantages of each type of entity.
Answer need this response -225 words and may be reference
Partnership and corporation are two considerations that Jennifer and Jamie can go for. Advantages and disadvantages pertaining to each are explained below.

Partnership
Advantage-
• your business is easy to establish and start-up costs are low
• more capital is available for the business
• you'll have greater borrowing capacity
Disadvantage- Unlimited liability, chances of conflict of interest, profits are to be shared and difficult to close.
• the liability of the partners for the debts of the business is unlimited
• each partner is ‘jointly and severally' liable for the partnership's debts; that is, each partner is liable for their share of the partnership debts as well as being liable for all the debts
Corporations
Advantage- Limited liability. The shareholders of a corporation are only liable up to the amount of their investments.
Source of capital. A publicly-held corporation in particular can raise substantial amounts by selling shares or issuing bonds.

Ownership transfers. It is not especially difficult for a shareholder to sell shares in a corporation, though this is more difficult when the entity is privately- held.

Disadvantages- Excessive tax filings. Depending on the kind of corporation, the various types of income and other taxes that must be paid can require a substantial amount of paperwork. The exception to this scenario is the S corporation, as noted earlier.

Independent management. If there are many investors having no clear majority interest, the management team of a corporation can operate the business without any real oversight from the owners.

The list of questions are:

What type of business are they willing to operate? - Depending on that we have to decide on the need for limited liability or the need for raising capital by selling shares

B.Determine the percentage of ownership both of them will hold within the business?

C.What type of income is anticipated? - Because that will flow through individual tax returns or
will be reported as dividend payout in case of c corporation.

D. What will happen to the profit (if any) for each year? Will it roll over to the next business year or will it be drawn out at the end of the year?

Attachment:- Advanced Federal Taxation.rar