Sie sind auf Seite 1von 7

Individual Paper 1

Tracy Branton ACC 561 Michelle Yeager 08/02/2011

Individual Paper 2

What are the advantages of a sole proprietorship? My findings are that when a person chooses to open a sole proprietorship it is simple to set up, owners have complete control over every facet of the business, and favorable tax treatment. In addition the cost to set up a sole proprietorship is inexpensive (CA.gov, 2011). What are the disadvantages of a sole proprietorship? The owner of a sole proprietorship is liable for all debts and liabilities. There is no separation from business and owner. Any person items of the owner can be taken to satisfy a judgement of the business i.e. home, car, personal savings etc. As a single owner it can often be difficult to raise capital for the business as well. What are the advantages of a partnership? When two or more people join together to form a business this would be considered a partnership. Often an advantage of of this is that the partners can bring unique skills or resources (Kimmel, pg. 4, 2009). Partnerships are also simple to establish, and are controlled by the owners. On top of that, partnerships will also receive favorable tax treatment. Meaning Owners of proprietorships and partnerships report their share of earnings on their personal income tax returns. The individual owner then pays taxes on this amount (Kimmel, pg. 553, 2009). What are the disadvantages of a partnership?

Individual Paper 3 Similar to a sole proprietorship in a partnership the owners of the business are personally liable for all debts and liabilities. Parters are also liable for all legal and financial obligations of the partnership and for all wrongful acts of any partner acting in the ordinary course of partnership business (CA.Gov, 2011) Meaning, there is no separation owner from business. The owners personal belongings can be taken and one owner can be held liable for another owners actions. Additionally if a business sees a year of losses the owner will have to claim those losses on their personal income. Financial statements for a sole proprietorship and a partnership Income Statement The income statement reports if a company was successful in a particular period of time. The income statement reports the revenues of a company minus the expenses resulting in the net income or net loss. Retained Earnings Statement The retained earning statement shows the amounts and causes of the changes in retained earning during the period (Kimmel, pg. 13, 2011). A business will retain the earnings for future investments and growth. The business will add the net income or deduct the net loss from retained earnings. This statement reflects a businesss ability to pay debt. Balance Sheet The balance sheet will reflect assets and liabilities. The balance sheet will reflect a companys financial position on a particular date.

Individual Paper 4 Statement of Cash Flows This statement is to provide information about the inflow and the outflow of the most important asset, i.e. cash. This reports the effects of a companys operating, investing, and financing activities (Kimmel, pg.15, 2011). The statement of cash flow will tell a reader where the cash came from, how the cash was used, and how the balance was changed during the period. Tax implications of a sole proprietorship & partnership The owner of a sole proprietorship will be claiming all profits and losses of the business on their personal taxes. The same will go for a partnership, the owners will take their share of the earnings or losses and claim this on their personal taxes as well. At the end of the year, the owner will be paying taxes on the earnings for the company. Another thing to keep in mind would be medicare and social security. This will be another expense that comes along with sole proprietorship and partnerships. Legal Implications of a Sole Proprietorship As the owner of a sole proprietorship the owner can bring lawsuits and be sued in the name of the sole proprietor, since the owner and the business are one entity. There could be a case where an employee was negligent and this resulted in injury or even death, and this brought on a lawsuit, it is possible that the owner would be sued. Legal Implications of a Partnership

Individual Paper 5 Just as with the sole proprietorship, the owners of a partnership can also be sued for any business debt. In addition personal belongings can also be garnished to satisfy debt. Partners can also commit other partners to obligations, for instance one parter can sign a contract and bind the entire organization to that new contract. SOX The signing officers have reviewed the report The report does not contain any material untrue statements or material omission or be considered misleading The financial statements and related information fairly present the financial condition and the results in all material respects The signing officers are responsible for internal controls and have evaluated these internal controls within the previous ninety days and have reported on their findings A list of all deficiencies in the internal controls and information on any fraud that involves employees who are involved with internal activities Any significant changes in internal controls or related factors that could have a negative impact on the internal controls (Soxlaw.com, 2003) Product or Service I would want to open a bar, dance club, and restaurant. The ambiance would be casual and nostalgic, the drinks, music and food would do the same. Possibly the

Individual Paper 6 the 20s western. I havent quite figured out the dance club part maybe at the later part you can go to an under ground where there is a more popular music area so people can dance so that you can still draw the crowd for the late evening. Business Organization and Rationale I would choose to operate a partnership. I would choose this because if you work with people that you trust the benefits outweigh the costs. You can have more opportunity to raise money, you have extra help, you have more creative thoughts. In addition you have another person there during the long grueling hours of trying to open a new business. I would also want to do this with my sister if at all possible although they do say to not do business with family.

Individual Paper 7

References CA.Gov. (2011). General Partnership. Retrieved from http://www.business.ca. ov/!tarta"usiness/#efinin a"usiness/Genera$%artnership.asp& CA. ov. (2011). Sole Proprietorship. Retrieved from http://www.ftb.ca. ov/businesses/bus'structures/so$eprop.shtm$ Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2009). Accounting: Tools for business decision making (3rd ed.). Hoboken, NJ: John Wiley & Sons. !o&$aw.com. (200(). Sarbanes-Oxley Act Section 302. Retrieved from http://www.so&$aw.com/s(02.htm