Business Taxation: Zing Zang Zong Case Study - Essay Example

While understanding that incorporated companies will benefit significantly from the proposed reduction in corporation tax, Ben, the owner of Zing Zang Zong intends to register the business in order to derive such benefits. The following is a report that evaluates various aspects of taxation as corresponds to Zing Zang Zong’s business operations. For instance, the report examines the implications of the two alternative business structures that is, non-incorporated and incorporated in respect to taxation.

On a different perspective, this report provides recommendations on the viable business structure arising from the examination above. Lastly, the report explains whether transferring the business to a company qualifies for capital gains tax incorporation relief. Taxation Implications of Corporation and Sole-Proprietorship Structure There are different business structures that either benefit or are disadvantaged from the taxation policies within any economy. Ben is torn between the current sole-proprietorship and the intended structure of a corporation.

Both business structures attract different implications in respect to taxation. The following outlines the advantages and demerits of sole-proprietorship and corporation business structures. . Due to being indistinguishable from its owners the taxation requirements and regulations are very simple. In this regard, the income earned by the sole proprietorship is considered as the income of the owner hence taxed as though it was one. In this scenario, there are no chances of being taxed twice that is, the company’s net income considered separate from the owner’s income (Lymer and Oats, 2011).

Therefore, if Ben opts to continue operating the business as a sole proprietorship, then the tax implications is that net income from the business will be taxed and assumed to be the net income of the owner. In addition to considering the net income from the business as the owner’s net income, the tax implication of sole proprietorship is that the owner does not need to pay taxes for unemployment apart from those of the workers. The reason as to why owners of businesses are not allowed to pay unemployment tax on them is because in the event that the business suffers the owners will not enjoy the benefits of unemployment (Taxation FA11, ACCA F6).

It is required that in this perspective Ben operating as a sole proprietorship will always be submitting unemployment taxes on the employees of the company other than himself. This however differs from one economy to another given the various unemployment benefits that unemployed persons are entitled to. Therefore, Ben will be forced to comply with such taxation implications or provisions should he choose to remain operating as a sole trader. Another tax implication for opting to remain as sole proprietorship includes the asset protection benefit that will not be granted.

Under sole proprietorship, the owner is not entitled to asset protecting from the fact that there is