Business Structure

Question 1

Sole Prop

Answer 1

• Unlimited personal liability
• individual pays individual taxes
• total control
• no formal docs

Question 2

General Partnership

Answer 2

• Two or more people take the business as a profit
• pass through taxation, where partnership enjoys single taxation because the entity pays no taxes and partnership income passes through to the individual partners who pay individual taxes on their share
• no formal documents
• all general partners are personally liable for the obligations of the business

Question 3

Joint venture

Answer 3

One shot general partnership type legislation

Governed by partnership law (general partnerships)

Question 4

Limited Partnership

Answer 4

One general partner and one limited partner
General partner must be liable to creditors but will shield individual business owners from personal liability on debts
Separate legal entity
Pass through taxation
Legal documents in state of office
Limited partner must forfeit the right to manage business in order to have limited liability

Question 5

Limited Liability Partnerships

Answer 5

• Single taxation like partnerships
• Not liable for general obligations of partnership but are liable for tort liabilities generated by own actions and actions they supervise
• Actively involved in managing the partnership
• Legal documents must be filed within state + insurance requirement and LLP’s are limited professions

Question 6

Limited Liability Limited Partnership

Answer 6

General partners of a limited partnership enjoy limited liability

• Single taxation
• Limited partners enjoy limited liability
• only 25 states authorize LLLP
• Legal documents must be filed within state

Question 7

Corporation

Answer 7

Double taxation - pay corporate income tax on their profits and then distribute their gains to shareholders in the form of dividends and the shareholders pay individual income tax on their dividend income (Actually received the dividend income)
- legal docs must be filed in state office
- Allows to limit personal liability for shareholders
Shareholders can contribute property into a corporation without being taxed.

Question 8

S corporation

Answer 8

Eliminate double taxation; pay single
No more than 100 shareholders
S shareholders enjoy limited liability
- legal docs must be filed in state office
- corporate profits are taxed as if they were distributed to shareholders so s corp shareholder may be taxed on income he/she never received
Shareholders can contribute property into a corporation without being taxed.

Question 9

Limited Liability Company (LLC)

Answer 9

• business gain limited liability advantages while being taxed as a pass through benefits in partnership form
• taxed as if they are s-corporation

Question 10

Requirements a corporation needs to meet in order to meet s corp tax benefits

Answer 10

It is a domestic corporation;
All shareholders must consent to the S-Corporation election;
The firm can have no more than 100 shareholders, although all members of a family can be treated as a single shareholder;
All shareholders must be individuals, estates, certain exempt organizations, or certain trusts; and
The corporation has only one class of stock (i.e., all outstanding shares confer identical rights to distribution and liquidation proceeds).
Limited Liability Companies

Question 11

Requirements a corporation needs to meet in order to meet s corp tax benefits

Answer 11

• It is a domestic corporation;
• All shareholders must consent to the S-Corporation election;
• The firm can have no more than 100 shareholders, although all members of a family can be treated as a single shareholder;
  All shareholders must be individuals, estates, certain exempt organizations, or certain trusts; and
• The corporation has only one class of stock (i.e., all outstanding shares confer identical rights to distribution and liquidation proceeds).

Question 12

Limited Liability Companies

Answer 12

Pass through taxation as partnership without having to meet the S corp requirements; can be taxed as corp if it wishes to do so
All limited partners enjoy limited liability without forfeiting requirements
Legal docs requirement within state office

Question 13

Articles of incorporation

Answer 13

(1) the name of the corporation; (2) the number of shares it is authorized to issue; (3) the street address of its registered office and the name of its agent at that address; and (4) the name and address of each incorporator.