Business Organization And Legal Liabities Test Study Guide Flashcards
What is a Sole Proprietorship?
A business owned and operated by a single individual.
What are the advantages of a Sole Proprietorship?
Full control, easy setup, pass-through taxation.
What are the disadvantages of a Sole Proprietorship?
Unlimited personal liability, difficult to raise capital.
What is a partnership?
A business owned by two or more people.
What are the types of partnerships?
General partnership, limited partnership (LP), and limited liability partnership (LLP).
What are the advantages of a partnership?
Shared responsibility, relatively simple, potential for diverse skills.
What are the disadvantages of a partnership?
Unlimited personal liability (general partners), potential for conflicts.
What is a Limited Liability Company (LLC)?
A hybrid business structure that combines the liability protection of a corporation with the tax benefits of a partnership.
What are the advantages of an LLC?
Limited liability, flexible structure, pass-through taxation.
What are the disadvantages of an LLC?
More paperwork than a sole proprietorship or partnership, state-specific rules.
What is a corporation?
A legal entity separate from its owners, with shareholders, directors, and officers.
What are the types of corporations?
C-corporation (C-corp), S-corporation (S-corp).
What are the advantages of a corporation?
Limited liability, ability to raise capital, perpetual existence.
What are the disadvantages of a corporation?
Complex formation, higher regulatory scrutiny, potential double taxation for C-corps.
What is an S-Corp?
An S-Corp has pass-through taxation, where profits and losses are passed to shareholders. It is limited to 100 shareholders and cannot have foreign shareholders.
What is a C-Corp?
A C-Corp is a separate taxable entity that is subject to double taxation, meaning it is taxed at the corporate level and again at the individual level on dividends.
What is the Maryland Business Express?
The official online platform for starting, managing, and registering businesses in Maryland.
What are the key features of the Maryland Business Express?
- Online business registration and formation.
- Tools for managing annual reports and business licenses.
- Information about taxes, permits, and business laws in Maryland.
What important functions does the Maryland Business Express provide?
- Registering an LLC, Corporation, or Partnership in Maryland.
- Filing the Articles of Incorporation or Organization.
- Applying for state business licenses and permits.
- Updating business entity details and renewing registrations.
What is an EIN?
A nine-digit number issued by the IRS used to identify a business entity for tax purposes.
Required for corporations, partnerships, LLCs with employees, and those required to file certain federal tax returns.
Why is an EIN needed?
For tax reporting, hiring employees, and opening a business bank account.
It is a critical part of the compliance process and helps to keep business and personal finances separate.
