I\'m confused on these questions. Please help. 1a) Why do you suppose that a bra

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I'm confused on these questions. Please help.

1a) Why do you suppose that a brand-new firm rarely begins as a publicity held corporation?

1b) How might tougher regulations and higher tax rates dissuade establishment of new business proprietorships and partnerships?

Fewer New Firms Are Setting Up Shop Panel (a) of Figure 21-3 above shows that through the mid-2000s, at least 600,000 new U.S. proprietorships and partnerships began operations each year. Since 2008, how- ever, substantially smaller numbers of these firms have opened for business In addition, panel (b) shows that between 1991 and 1999, at least 300 proprietorships or partnerships reorganized annu- ally as corporations via initial public offerings (IPOs) of stock. Since then, there have been many fewer IPOs Explaining the Shrinking Numbers of Each Type of Business A fall in the number of proprietorships and partnerships opening their doors for the first time typically reflects low anticipation that brand-new bus ceed. Consequently, the drop-off in formation of new busi- ness partnerships and proprietorships depicted in panel (a) of Figure 21-3 likely mainly reflects the dampened state of U.S. economic activity since 2008 inesses will be able to suc Something that Figure 21-3 does not show is that doz- s have chosen to incorporate in recent years. They have done so outside the United States. One reason to incorporate abroad is tougher regulations imposed on public corporations based in the United States. These regulations give some existing proprietorships and partnerships an incentive to incorporate abroad to avoid the costs of abiding by those ens o of existing U.S. proprietorships and partnership

Explanation / Answer

1a) Why do you that a as a held corporation?

Closely held firms are those in which a small group of shareholders control the operating and managerial policies of the firm. Over 90 percent of all businesses in the United States are closely held. These firms differ from most publicly traded firms, in which ownership is widely disbursed and the firm is administered by professional managers. Most but not all closely held firms are also family businesses. Family businesses may be defined as those companies where the link between the family and the business has a mutual influence on company policy and on the interests and objectives of the family. Families control the operating policies at many large, publicly traded companies. In many of these firms, families remain dominant by holding senior management positions, seats on the board, and preferential voting privileges even though their shareholdings are significantly less than 50 percent.

One of the major concerns associated with closely held firms is the determination of their value. This uncertainty is largely due to the fact that shares of a closely held business are owned by a small number of stockholders, and often by members of a family. Because there is no established market for the shares, it is difficult to establish the value of the shares in an estate or gift tax situation.

1b) How might tougher regulations and higher tax rates dissuade establishment of new business proprietorships and partnerships?

Types of Business Organization:

It is important that the business owner seriously considers the different forms of business organization—types such as sole proprietorship, partnership, and corporation. Which organizational form is most appropriate can be influenced by tax issues, legal issues, financial concerns, and personal concerns. For the purpose of this overview, basic information is presented to establish a general impression of business organization.

Sole Proprietorship:

A Sole Proprietorship consists of one individual doing business. Sole Proprietorships are the most numerous form of business organization in the United States, however they account for little in the way of aggregate business receipts.

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Partnership:

A Partnership consists of two or more individuals in business together. Partnerships may be as small as mom and pop type operations, or as large as some of the big legal or accounting firms that may have dozens of partners. There are different types of partnerships - general partnership, limited partnership, and limited liability partnership - the basic differences stemming around the degree of personal liability and management control.

Advantages:

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