Chapter 8.2, Problem 5R

To determine

To evaluate: The reasons sole proprietorships and partnerships pay relatively lower taxes than other types of business organizations.

Explanation of Solution

Taxes on a sole proprietorship are typically minimal, as a company owner only pays taxes on income. As with sole proprietorship, taxes under partnership also appear to be minimal, because partners only pay income tax on their share of profits. In general, partnerships are more successful since each partner may operate in his or her field of expertise.

The main difference between partnership and sole ownership is the number of owners the company has. "Sole" means one and only one person has a sole proprietorship. On the contrary, establishing collaboration involves more than two because this type of company has at least two members.

Since other businesses are subject to double taxation, they pay more tax than sole ownerships and partnerships. Sole proprietorship and partnerships pay only tax on income.

Therefore, they pay lesser taxes than other business organizations.

Economics Concept Introduction

Introduction: In today's corporate world, there are various types of business organizations. The quality of any undertaking depends on its structure. Single proprietorship, association, and company are major kind business organizations.