Business Types Flashcards
A business of one
Sole Proprietorship
When only one person owns a piece of property and title is in that person’s name, this is because ownership interest is ____ severed from all others.
ownership in severalty
Partnership where either of you may sell your interest, or your interest may be passed down to heirs. This type of ownership does not have the right of survivorship
tenancy in common
Partnership that includes the right of survivorship. If you die, your partner gets full ownership, or if your partner dies, you get full ownership.
joint tenants
conveys personal liability to partnership debts that exceed the partnership assets. ________ partners are jointly and separately liable for these debts. So if you are in business with one of your partners and he absconds with all of the partnership funds, leaving behind creditors, you are liable to those creditors, as are any and all partners. Creditors don’t care who took the money—they will hold all partners responsible.
general partnership
One or more general partners who assume liability. The other partners are limited in their liability related to the amount of money they have contributed. Limited partners are also limited in authority. To protect their immunity from partnership debts, they may not participate in managing the partnership. Limited partners who participate in managing the partnership may become generally liable. Limited partnerships are a common form of holding real estate. Usually, the general partner is the one who discovers the investment opportunity and brings in limited partners for their funds. The general partner will do the work, and the limited partners will profit or see a loss from their investments according to the partnership agreement, and the success or failure of the project.
limited partnership
____ do not exist in bricks, mortar, or even people, but are an intangible, taxable, recognized legal entity. _____ have tax rates separate from individual tax rates.
Corporations
______ can receive, hold, and transfer title to real property, and may give, or hold a mortgage to secure a debt owed to the _______ . Property owned by a corporation is owned in severalty, which you may recall is also how property is owned by a sole proprietorship. The corporation’s bylaws give authority to named individuals who may sign documents on its behalf.
Corporations
(permitted to function as a corporation but taxed as a partnership), do not pay corporate income taxes, and so they avoid double taxation. In addition, shareholders in a Subchapter S may deduct losses on their income taxes representing their share of the corporation’s losses.
Subchapter S
which must pay corporate income tax to the IRS. double taxation: once at the corporate level and again at the shareholder level
C corporation
Are not personally liable for LLC/LLP obligations, are taxed as partnerships, and do not require a general partner.
Limited Liability Companies (LLCs) and Limited Liability Partnerships (LLPs)
Are groups of investors pooling their money in pursuit of a single investment goal, such as buying an office building. The _____ is organized by a sponsor who does the investment legwork and property management and who asks many investors to join in the real estate investment, with everyone sharing in the profits. The sponsor can be an individual or a business organization.
Syndicate
Are not a business enterprise, per se, but a temporary organization formed by two or more parties to invest in real estate (or other investments). Participants may be corporations, partnerships, LLCs, or other entities. The parties may hold title as joint tenants or tenants in common.
Joint ventures
