Question

Marvin is planning to open a fabric dyeing business. He plans to do large scale dyeing of both fabric bolts and ready-to-wear garments. The source of business will be garment makers and cleaners. He has worked in this part of the fashion industry and knows how much capital he will need to buy the equipment required for this specialized activity.

He has some cash, and he is trying to decide whether to incorporate or to form a partnership. What would you say to him about the major advantages and disadvantages of chartering a corporation rather than forming a partnership?

Answer 1

First of all, if he is looking to have limited liability, then he should go with a corporation. A partnership has direct exposure and tax consequences. The company pays their tax and the the shareholder pays again with their personal returns via K-1. An LLP (limited liability partnership) would be an option if he was just contributing capital.

As for the corporation side, unless there are reasons for the corporation, I would suggest an S- Corp. You can elect to change this to a C- Corp later if you choose. There are some differences in treatment from the IRS. The tax liability/responsibility is passed to the shareholders through K-1's.

Answer 2

Neka kiser, vice president of operation mountain national bank, has instructed the bank’s computer programmer to use a 356-day year to compute interest on depository account payable . neka also instructed the programmer to use a 360-day year to compute interest on loans receivable.