TAX ASSIGNMENT

Tax Assignment

Table of Contents

Introduction3

Sole Trader or Limited Company3

Taxation of Individual Entrepreneur5

Calculation of assessable profits from the business6

Allowable and Disallowable Expenses8

Liability to tax and obligations and responsibilities in relation to the filing of the different tax returns both for himself and as an employer11

Recommendations for Minimizing Tax Liability13

Tax Assignment

Introduction

The study focuses on the decision of setting up a new business. To start a new business, it is important to know about what type of business, person should go for as there are many obligations of taxation from which an owner has to pass. While starting a business, it is important to know what advantages or disadvantages an owner can face in relation to taxation. The owner has two options of business to choose that is to set up the business as a sole trader or as a limited company. Both these have dissimilar taxation benefits; therefore, it is crucial for the owner to be aware of taxation.

Sole Trader or Limited Company

It is proposed that business as a sole trader should be set up, from the perspective of taxation. As in a sole proprietorship, the owner get various advantages in a sole proprietorship, for instance, the main advantage of a sole proprietorship is the way they treat taxes. The sole proprietor does not need to file corporate income tax or any other complicated tax form. The business tax passed to the owner and pay taxes as regular income or salary. In sole trader business owner will consider only the most primary business form, because to have a sole proprietorship, you just start doing business. The only requirement is that the business can only offer an owner. If you have more than one owner, then it would be considered a general partnership.

Advantage

The exclusive property has no double tax on earnings, as in other business structures. All taxes are reported in the owner's separate statement. In addition to this, the costs are minimal (only requires a fictitious business name, bank account and a business license). A sole proprietor may transfer its business quietly selling all parties or a portion of their property. Moreover, the advantage offered by the sole proprietorship over other business forms as there is only one owner, the owner need not consider anyone else to make decisions. As you are the owner, you have complete control of the company. This form works very well for a small company that does not incur any significant liabilities and costs does not require much to maintain (McClelland & Green, 2004, pp. 148-151).

The sole proprietor will also not need to file certain forms with the state. Most states require corporations, and some companies, register with the state. The sole proprietorship does not have this requirement. You go out and simply start to negotiate. Keep in mind that although there is no record, there are probably other laws, so check with an attorney.

Disadvantages

The main disadvantage of a sole proprietorship is the responsibility of the owner for the ...