Other Business Organization Types Flashcards
What is a Sole Proprietorship?
In a sole proprietorship, one person owns all of the assets of the business. There is no business entity distinct from the owner. The owner is personally liable for the business’s obligations.
- The business “entity” cannot continue beyond the life of the owner.
- Ownership is freely transferable, and all profits and losses from the business flow through directly to the owner.
What is a Partnership?
A partnership has at least two owners of the business.
How is a Partnership different from a Corporation?
- Little formality is required to form a partnership (just an intention to carry on as co-owners a business for profit)
- Partnerships generally are not treated as legal entities apart from their owners. Partners are personally liable for obligations of the partnership, and management rights generally are spread among the partners.
- Ownership interests of partners cannot be transferred without the consent of the other partners.
- A partnership generally does not continue beyond the lives of its owners.
- Finally, profits and losses of a partnership flow through directly to the partners unless the partners have elected to be taxed as a corporation.
What is a Limited Liability Company?
A limited liability company is a business organization that is designed to offer the limited liability of a corporation and the flow through tax advantages of a partnership.
How is a Limited Liability Company similar to a Corporation
- LLC may only be formed by filing appropriate documents with the state
- Owners may chose between: a) centralized vs. owner management and/or b) free or restricted transferability of ownership
What is a Benefit Corporation
A benefit corporation (“B corporation”) intends to benefit the public and the environment, in addition to its shareholders. B corporations are treated the same as C corporations for tax purposes.
