Small Business, Essay Example

In order to create a successful small business, it is important to not only develop a plan but to begin by choosing a business venture that will be successful over the course of time.  Fabric coating is a sensitive process that hundreds of clothing companies use within the technology of designing their myriad fabrics.  It has become highly demanded in most countries modern economies that seek advanced, multiple uses for clothing and other garments.  Fabric coating is the high-tech coating technology for garments involved attaching a layer of protective coating on the surface of fabrics and also around the fibers so as to enhance the functional value of garments, such as wrinkle resistance, soil release, stain repellence, flame retardance, fade resistance, and moisture and odor control.  Through this process, fabric coating has created technologically-advanced clothing, purses, footwear, and even camping equipment to help add to the multiple uses that the consumer population demand.  Therefore, the proposed business venture would create a fabric company that utilizes the fabric coating process to produce environmentally friendly, sustainable and durable.

First of all, the task lies in choosing the most appropriate level of business that will not only provide the best tax benefits but also enable the company to be financially successful from an accounting perspective as well.  An S-corporation is one of the first choices for a small business venture.  First of all, the corporation must be a small business.  The corporation must also be a domestic corporation, have no more than 100 shareholders, include only eligible shareholders, have only one class of stock and must not be an ineligible corporation (BizFilings, n.d.).  These requirements must be met in order for a corporation to apply for S-corporation status.

A sole proprietorship is a business that is owned and usually operated by one person.  Advantages of a sole proprietorship are that they are easy to start up or close down, individuals have a sense of pride of ownership; the individual retains all profits and has flexibility of being their own boss without having any special taxes.  Disadvantages of a sole proprietorship are that they have unlimited liability, a lack of continuity, lack of money, limited management skills, and difficulty in hiring employees.

C-Corporations are slightly different and provide their own benefits.  According to IRS Publication 538, C Corporations are able to choose any month end for their tax year (ObliviousInvestor, 2010).  However, S Corporations, Partnerships, and LLCs are required to use a calendar year.  If the companies meet specific requirements, they may be able to file on the fiscal year as opposed to the typical calendar year.  However, almost all of these other forms of businesses must file on a calendar year basis.  This provides greater variance for the C-Corporation in order to choose the appropriate tax year that provides the best tax benefits possible.

A general partnership is a co-owned business by two or more general partners who are each liable for everything the business does.  Depending on the number of owners, the partnership may have unlimited liability, similar to that of a sole proprietorship.  A partnership can also be more appealing to a customer because of the multiple talents and managerial skills of the owners that are running the company (ObliviousInvestor.com, 2010).  Partnerships usually reduce or completely eliminate the lack of money, managerial skills and difficulty in hiring employees that are all disadvantages of a sole proprietorship.

References

BizFilings.com (n.d.). S corporation vs. c corporation: a comparison. Retrieved from http://www.bizfilings.com/learn/s-corporation-vs-c-corporation.aspx

ObliviousInvestor.com (2010). Llc vs. s-corp vs. c-corp (the 3-minute version). Retrieved from http://www.obliviousinvestor.com/llc-vs-s-corp-vs-c-corp/