Legal (business) structures

Question 1

General steps to be taken regardless of business structure

Answer 1

Organizational planning

Question 2

Choosing a business structure is just a ___

Answer 2

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

Question 3

What is the difference between proprietor/ partnership and a corporation?

Answer 3

Proprietor/ partnership - unlimited liability
Corporation - limited liability

Question 4

What are the types of businesses considered under a partnership?

Answer 4

-General
-Limited partnership, LLP, LL-LP (these three have some degree of limited liability)

Question 5

What are the types of businesses considered under a corporation?

Answer 5

-C-corp
-S-copr
-Professional corp
-Non profit
-*LLC (technically a hybrid but is close to a corp)

Question 6

What are the features of a proprietorship?

Answer 6

-One owner
-Unlimited liability
-Easy to form
-Limited life
-Pass through taxation

Question 7

What are the features of a partnership?

Answer 7

-2 or more owners
-Easy to form
-Unlimited liability
-Pass through taxation
-Limited life
-Voluntary association
-Combined resources
-Joint profit

Question 8

Type of partnership where there is:
-Active management/ involvement
-Known partners

Answer 8

General partners

Question 9

Type of partnership where there is:
-Liability for partners is limited (at least one with limited liability)

Answer 9

Limited parnter

Question 10

What are the features of a corporation?

Answer 10

-1 or more owners
-More difficult to form
-Limited liability (legal entity)
-Double taxation
-Unlimited life
-Stockholders

Question 11

What is a C-corp?

Answer 11

-Ordinary corporation
-Separate legal entity
-Taxed by the federal government (double taxation)

Question 12

What is an S-copr?

Answer 12

-Limited liability
-Taxed as a partnership
-Operates in the calendar year (not fiscal)
-Pass through taxation

Question 13

To be taxed as a partnership (pass through taxation) the following requirements have to be met for the business and the stockholders:

Answer 13

-Must be domestic USA
-US residents only can be shareholders
-One class of stock

Question 14

Hybrid form of business organization
-Combines features from Corporations (limited liability) and Partnerships (pass through taxation)

Answer 14

LLC

Question 15

What are the basics of an LLC?

Answer 15

-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)

Question 16

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

Answer 16

Professional corporation

Question 17

Usually serve one of the following areas of service: civic, education, charitable, religious
-Tax exemptions for business and donors

Answer 17

Non profit corporations or “not for generating profit”

Question 18

What is the organizational test used when looking at successful non profits?

Answer 18

“Is the business staying true to it’s purpose?”