Small Business Idea

Small Business Idea

Dionicio A. Jorge

ACC/561

02 Feb 2015

Dr. Larry Key

Small Business Idea

Starting a small business is a good idea for someone wanting to become his or her own boss. The first step is coming up with an idea for that business and a realistic goal of how to run it. The business that I would be interested in starting would be a golf club repair company.  I have four golf courses with in 5 miles and the nearest golf store with a repair shop is 25 minutes away. The advantage that I would have is a quicker turn around time with a lower price.

There are different forms involved when starting a business. For the purpose of this paper the business forms that will be covered are sole proprietorship, partnership, C corporation, and S corporation.

Sole Proprietorship:

Advantages

• Simple and cost effective
• Offers complete control to the individual
• Taxes are not file separately
• Taxed at the lowest rate of any other form
• Health insurance is 60% deductible

Disadvantages

• You are personally held liable for everything
• Little to no investors due to the size
• Hard to raise capitol
• Running it can be a heavy burden your all alone, highly stressful

Partnership:

Advantages

• You have a partner (up to 20 people), income splitting
• Easy to set up, low costs
• Raising capitol is easier
• Structure can be changed if needed

Disadvantages

• Unlimited liability for partners debt
• Risk of disagreement and friction between partners
• Your partner can leave or cause damages which your liable for
• If you have new partner you will have to value all assets which would be expensive

C Corporation:

Advantages

• Limited liability for directors, officers, shareholders and employees
• Perpetual existence even if the owner decides to leave
• Unlimited growth potential through sale of stock and number of shareholders
• Taxed deductible business expenses
• Employees health benefits are 100% deductible

Disadvantages

• Double taxation of profits earned and once again when distributed to shareholders
• You can’t deduct any corporate losses
• Governed by state and federal statues, quarterly taxation  
• Very expensive because of the interstate business

S Corporation:

Advantages

• Limited liability for directors, officers, shareholders and employees
• Owners report their shares and losses on individual taxes
• No double taxation
• Investment opportunities through sale of stocks
• Perpetual existence even if the owner decides to leave

Disadvantages

• Strict requirements for shareholders
• Limited to 100 shareholders
• Firm profit and loss allocation
• Lots of corporate formalities

          The financial forms that is required for the different forms of business. There are four different required of business in the United States. Those forms are the balance sheet, income statement, statement of cash flow, and statement of shareholders equity. Business forms such as C and S corporations have no auditor requirements unless if they are publically trade which would make them subject to the Sarbanes Oxley Act.