Accounting Choosing the Right Structure Term Paper

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, 2010). Where there is the sale of shares, there is also a great potential that the existing owners will have little control over who the shares are subsequently sold to, especially in a quoted company. The firm will also be subject to the Sarbanes-Oxley Act (SOX), which was also known as the "Company Accounting Reform and Investor Protection Act," in the Senate (Libby et al., 2010).

3.

Decision for the Business

As the business is a new idea, and will initially only involve a single person, the idea of a partnership may be eliminated. This leaves sole proprietorship and corporation. If there is to be only one owner the S-corporation may be used, as this may accommodate a single shareholder. This structure may be attractive as the business will be a separate entity, especially as the owner will not carry any personal liabilities for the business debts.

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However this is costly to set up and maintain: a particular issue when a business is just starting up. It may also be argued that a new corporation without a credit history may be unattractive to creditors and lenders, so the protection afforded by the corporation may be undermined if the potential lenders as for personal guarantees. This leaves the sole proprietorship, which is both quick and cheap to set up and is easiest in terms of tax reporting, with the profits forming part of the owners own income. Therefore, it is recommended that the start up should use a sole proprietorship structure......

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