Legal (business) structures Flashcards
General steps to be taken regardless of business structure
Organizational planning
Choosing a business structure is just a ___
Formality
-Doesn’t change the way the business actually functions
-Just because a company is small doesn’t mean it is not a corporation
-Different structures are just different legalities
What is the difference between proprietor/ partnership and a corporation?
Proprietor/ partnership - unlimited liability
Corporation - limited liability
What are the types of businesses considered under a partnership?
-General
-Limited partnership, LLP, LL-LP (these three have some degree of limited liability)
What are the types of businesses considered under a corporation?
-C-corp
-S-copr
-Professional corp
-Non profit
-*LLC (technically a hybrid but is close to a corp)
What are the features of a proprietorship?
-One owner
-Unlimited liability
-Easy to form
-Limited life
-Pass through taxation
What are the features of a partnership?
-2 or more owners
-Easy to form
-Unlimited liability
-Pass through taxation
-Limited life
-Voluntary association
-Combined resources
-Joint profit
Type of partnership where there is:
-Active management/ involvement
-Known partners
General partners
Type of partnership where there is:
-Liability for partners is limited (at least one with limited liability)
Limited parnter
What are the features of a corporation?
-1 or more owners
-More difficult to form
-Limited liability (legal entity)
-Double taxation
-Unlimited life
-Stockholders
What is a C-corp?
-Ordinary corporation
-Separate legal entity
-Taxed by the federal government (double taxation)
What is an S-copr?
-Limited liability
-Taxed as a partnership
-Operates in the calendar year (not fiscal)
-Pass through taxation
To be taxed as a partnership (pass through taxation) the following requirements have to be met for the business and the stockholders:
-Must be domestic USA
-US residents only can be shareholders
-One class of stock
Hybrid form of business organization
-Combines features from Corporations (limited liability) and Partnerships (pass through taxation)
LLC
What are the basics of an LLC?
-Legal entity = limited liability
-No shares of stock: the owner’s are known as “members” and members have “ownership stake”
-Taxed like a partnership (pass though)
Limits the liability of owners in a certain profession (doctors, lawyers, funeral directors)
-Reserved for professionals that require licensure
-Small amount of states recognize
-Does not protect owner from their own neglect
-In some states the equivalent is an LLC
Professional corporation
Usually serve one of the following areas of service: civic, education, charitable, religious
-Tax exemptions for business and donors
Non profit corporations or “not for generating profit”
What is the organizational test used when looking at successful non profits?
“Is the business staying true to it’s purpose?”
