How to account for Partnerships, Corporations, and Sole Proprietorships?
Describe the advantages and disadvantages of selecting a sole proprietorship, a partnership, or a corporation as the tax reporting entity for a new business. How do each of these taxable entities account for payments to owners who work at the business?
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When working as an accountant, one issue that often arises is the need to assist a new business owner in identifying the correct form a business should take, mainly for tax purposes. Choose one of the three taxable entities and present an example of a business situation that would correspond with that particular taxable entity. For example, if you are opening a chain of gas stations and you have three other investors, what business entity would be best to handle the tax reporting for your business venture? Explain your reasoning.