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?
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 (proprietorship, partnership, or corporation) 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.