what are the differences among the three types of business ownership.?

Question

which method of accounting, cash or accural is approved by GAAP? Why?

Answer 1

I would describe the sole-proprietorship, partnership and a corporation.

A sole proprietorship is an unincorporated business owned by one person (hence, the term sole). The owner of a sole proprietorship is known as a sole proprietor. If you conduct your business through a corporation, your business will not be a sole proprietorship. If you share ownership of your business with someone else, including your spouse, your business will not be a sole proprietorship.

The most important feature of a sole proprietorship is that the law makes no distinction between you, the sole proprietor, and your business. Virtually all the legal and tax consequences associated with sole proprietorships flow from this essential element. (Pls refer to the 1st link)

A partnership is the relationship between two or more who join together to carry on a trade or business. Each partner contributes money, property, labor, or skills, and each expects to share in the profits and losses. A partner can be an individual person, corporation, trust, estate, or another partnership. All general partners are personally liable for partnership liabilities. There can be no limited partners in a general partnership. (Pls refer to the 2nd link)

Corporation -
In a corporation, a legal entity (as opposed to individuals) owns the business assets and is liable for the business debts. A corporation offers the greatest flexibility in raising money from venture investors and is the structure that investors find most comfortable. (Pls refer to the 3rd link)

In case you're interested to know what an LLC is, it's a hybrid between a corporation and a partnership. A Limited Liability Company (LLC) has characteristics of a corporation and a partnership. An LLC allows its owners not to be personally liable for debts or liabilities of the business like a corporation, but have the tax benefits of partnerships. The owners of an LLC are called members which are somewhat analogous to shareholders. A member can be a natural person, a corporation, a partnership, or another legal association or entity. Unlike corporations or sole proprietorships, which may be formed by only one person, in most states, LLC's must be formed and managed by two or more members. The members may run the LLC themselves or through appointment of managers, who have similar levels of fiduciary duty to the LLC as do Directors of a corporation. (Pls refer to the 4th link)

For a Comparison of Sole Proprietorships, Corporations, Partnerships, and Limited Liability Companies pls refer to the 5th link.

Most GAAPs require accrual basis to be used. Only the smallest of businesses are allowed the cash basis, eg little mom and pop shops which have to pay their suppliers cash on delivery and who collect cash from customers. In this case, the difference in profit determined by using either method would not be very great. Other than these small outfits, the accrual method gives a much better picture of how a business has performed.

Answer 2

Three Types Of Business

Answer 3

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RE:
what are the differences among the three types of business ownership.?
which method of accounting, cash or accural is approved by GAAP? Why?