Finance Paper

FIN 571 / Business Structures Advice

Business Structure Advice

Dear John Owner,

Thank you for your interest in retaining the consulting services of our firm to start a paralegal firm in the state of Maryland. We will provide you with financial, legal, and tax information and the advantages and disadvantages of the three principal types of business structure, sole proprietorship, partnership, and corporation. The information is tailored based on the kind of industry and locality included in your request.

A sole proprietorship consists of one person as the owner of the business. The profits of the company hold solely by the business owner. The owner is required to obtain a use and occupancy permit from the county of the firm locality. However, a license is not necessary for paralegal services, but Maryland law requires that an attorney directly supervises the paralegals that work in the paralegal firm.

The business and the owner act jointly as the same entity. Therefore, the company does not file taxes separately; rather an owner must claim income and losses of the firm in the individual income taxes. The Internal Revenue Service (IRS) requires Schedule SE and Form 1040 are submit it together to include profit and losses derived from the business. Additionally, the owner must pay taxes quarterly by completing form 1040ES to avoid annual penalties.

The main advantages of a sole proprietorship are that the requirements to create the business are inexpensive; the owner has the control over the firm management strategies. The business does not have to pay taxes. The only disadvantage of the sole proprietorship is that the owner is financial and legally liable for business actions and liabilities. .

Exists two types of partnerships, general and limited. Both types of partnerships require two or more owners to enter into a partnership agreement. The agreement must stipulate the terms of the partners' association including their contribution,...