Business Entities
Essay by egocorp • November 10, 2015 • Essay • 437 Words (2 Pages) • 1,400 Views
BUSINESS ENTITIES
- What is your advice to Stanton?
After having examined the current structure and tax situation of Stanton Air, my advice to Mr. Stanton would be to register a one-member limited liability company LCC. There are various advantages to change business entity and go from a sole proprietorship to a limited liability company. The biggest disadvantage of the sole proprietorship, especially in the aviation industry where liability exposure is a constant hazard, is that Mr. Stanton has unlimited personal liability; this means that creditors of Stanton Air may recover on their claims pursuing Mr. Stanton business or personal assets.
- What are the pros that would result in Stanton following your advice?
The biggest pros for Mr. Stanton opening a one-member limited liability company LCC would be the shelter given from personal liability while keeping full control of his business. Because the LLC is recognized as a separate entity from its member(s) Mr. Stanton personal assets would be protected from creditors in case of claims against Stanton Air LLC. Another appealing pro of converting Stanton Air to a LLC would be the fact that Mr. Stanton can still chose to have the newly formed LLC taxed as a sole proprietorship (20% taxation), avoiding the highest corporate taxation of 30%.
- What are the cons that would result in Stanton following your advice?
The only con that Mr. Stanton would have to face would be the process necessary to form a LLC. To be able to convert Stanton Air to a LLC entity Mr. Stanton would need the state approval; to be granted the approval he would need to file articles of formation with the secretary of state in which the LLC is to be formed. The articles would need to contain:
- Name of LLC
- Address of the company and resident agent
- Purport of LLC
- Duration of LLC
Depending on the state Mr. Stanton would register the LLC he might also need to submit an operational agreement that includes the right and duties of the LLC members (in his case Mr. Stanton would be the only member), this document would need to include:
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