Sole proprietorships are businesses run by one person. A few
advantages of a sole proprietorship are that they are easy to start and
doesn’t require the business to be registered with the Secretary of
State. Also, there are fewer regulation on sole proprietorships, along
with having the freedom to take all profits and not having to answer
to anyone else. The disadvantages to sole proprietorships are that all
liability is taken on by the sole proprietor and that all business profits
are subject to both income and self-employment taxes.
Partnerships are a business entity formed by two or more individuals
and are separately co-invested in the business. A few advantages of
partnerships are that it is a pass-through entity, meaning that the
partnership doesn’t pay income tax, but the individual partners are
responsible for including profits and losses on their tax returns. Also,
partners are liable for each partners’ mistakes, unless the partnership
is a limited liability partnership.
Corporations are business entities that are separate and distinct from
their owners. They have the same rights and responsibilities as
individuals. A few advantages of corporations are that there is limited
liability between owners. Shareholders are only liable for their
investment and the corporation shields them from any further
liability. Also, corporations are pass through entities, meaning that the
corporations do not pay income tax, and profits and losses are passed
through to their shareholders. Disadvantages of corporations are that
there are many types of income and other taxes to be paid, depending
on the type of corporation, and there is double taxation.
In the future, I plan on having my own CPA firm. If I were to choose a
business structure, starting out I would most likely start as a sole
proprietor, as I will be starting the business on my own and will keep
the business small. As I grow my business, my business structure will
change. If I choose to bring on a partner or more, I will change my
business structure to a partnership.
References
Bragg, S. (2022, November 20). Corporation advantages and
disadvantages. AccountingTools. Retrieved February 2, 2023, from
https://www.accountingtools.com/articles/corporation-advantages-
and-disadvantages.html
Dtallent, B. (2022, December 20). Sole proprietorship vs. partnership:
Differences between these type of businesses. Camino Financial.
Retrieved February 2, 2023, from
https://www.caminofinancial.com/sole-proprietorship-
partnership/#:~:text=While%20partnerships%20have%20to%20pay,
sole%20proprietorships%2C%20partnerships%20are%20easy.
