In a sole proprietorship one person gets to control the decision
making and reap the profits. a Unfortunately, a sole proprietor is
individually liable for debts and damages incurred by the business. a A
partnership allows for additional individuals to contribute capital and
management duties. a Partners share in responsibility for debts and
damages of the business and may risk personal assets. a Furthermore,
every time a partner wants to leave or join, the partnership must be
reformed. Members of both types of organizations will be taxed at
their personal tax rates for their share of profits or losses.
Corporations protect investors from personal liability beyond their
investment in the business. An S-corporation will act as a
flowthrough entity and investors will be taxed at their personal tax
rates for their share of income/losses; C-corporations will be taxed at
corporate rates (and investors will be taxed at personal rates for
dividends received). Corporations allow investors to come and go as
they can buy and sell shares of stock while the entity remains intact.
In setting up a tutoring business, I would choose to utilize the
advantages of an S-corporation. a It would allow additional investment
from others while avoiding the potential for double taxation.
