Session 14 - Types Of Clients Flashcards
The adviser should establish, in consultation with the client, a written statement of objectives and investment strategy before making recommendations to the client. This document is frequently referred to as an ___________ ___________ ___________.
Investment Policy Statement (IPS)
LLC owners are _______, not shareholders, and are not personally liable for the debts of the LLC.
Members
S-Corps may not have more than ______ shareholders
100
The easiest business to set up, especially if you don’t expect much liability, is the _________. However, because the business and the owner are inseparable, there is unlimited liability and no limits to the amount of the loss (if any) that may be claimed on the tax return.
Sole Proprietorship
_________ and _______’s are generally easier to form and dissolve than a C corporation.
Partnerships and LLC’s
Benefits of structuring a business as a general partnership, and LLC or an S corporation would include NO double taxation, as is the case with a ________________.
C corporation
A company that expects to be very profitable should be a _________ instead of a partnership, an LLC or an S corporation because in those three, all earnings pass to owners - nothing can be retained.
C corporation
Only ________ and ________ are taxed on their income.
Sole proprietorship and c corporation are taxed on their income. The sole proprietorship on the owner’s personal tax return and the corporation on a Form 1120
The only logical choice where a large amount of capital is to be raised is the _____________
C corporation
The business entities that have limited liability for owners as well as flow-through of income or loss are the _______, _______ and _________.
Limited partnership, LLC and S corporation
The _______ has limited liability but no flow-through
C Corporation
The ______ and _________ have flow through-but unlimited liability
Sole proprietorship and general partnership
________ (including LLCs) survive the death of their owners
Corporations (including LLCs) survive the death of their owners (even if there is only one shareholder in an S corporation or C corporation, or one member of the LLC.
When it comes to transferability of ownership, the corporation form, especially the _____ corporation, is the preferred choice (selling shares is usually pretty straight forward.
C corporation
Enables the investment adviser representative to make investment decisions in the client’s account
Discretionary Authorization
A deceased’s fractional interest in an account is retained by his estate
Tenants in common
Legal document that authorizes someone other than the customer to have all privileges in an account
Full power of attorney
A client has an account where, upon her death, she desires that her only son will receive 50% of account value and her 4 daughters will receive 12.5% each. The easiest way to accomplish this would be to title the account ________
TOD - transfer on death requires no additional legal work and allows the account owner to designate beneficiaries in whatever percentages she wants. Furthermore, changes can be made at any time prior to death.
Three friends plan to start a new business. It is anticipated it will be several years before the business turns a profit. Which of the following types of business organization would be the best if they wish to limit their liability while, at the same time, being able to receive favorable tax treatment for the expected losses?
A. C corporation
B. S corporation
C. General partnership
D. Sole proprietorship
S corporation. The only way to limit liability is through a corporation (or LLC or limited partnership - either of which is offered here as a choice). The S corporation allows the flow-through of operating losses to shareholders while the C corp does not.
Trust property is also referred to as it’s principal or ______
Corpus
the grantor of the trust can also be the ________ and/or _______
Trustee and/or beneficiary
When a trust has run its course and all expenses and distributions have been made, the person who receives the remaining balance is called the ________
Remainderman
All income earned on assets placed into a _______ trust MUST be distributed during the year it is received.
Simple trust
A _______ trust may accumulate income
Complex
The key difference between a simple and a complex trust is that the simple trust ______ distribute all of it’s annual income, whereas a complex trust is not obligated to do so.
A simple trust must distribute all of it’s annual income
A revocable trust must be a living trust because only the living _____ has the power to change or revoke (undo) the trust
Living grantor
No estate tax benefit is available for a _____ living trust
Revocable living trust
Always follow the terms of the trust. Unless specifically stated in the trust documents, _______ trading is not permitted.
Margin trading is not permitted
__________ , also called limited trading authorization, allows entering of buy and sell orders but not the withdrawal of funds. Entry of orders and withdrawal of funds is allowed if full power of attorney is granted
Limited power of attorney
A _______ power of attorney survives the physical or mental incompetence of the grantor but not the death of either party.
Durable power of attorney. This means that orders received after the time of death of the grantor, even if the purchase or sale was decided upon prior to death, are not accepted.
Person legally appointed to manage and/or hold assets for the benefit of another person
Fiduciary
Once established, changes may not be made in this type of trust
Irrevocable trust
Person authorized by law to manage the estate of a decedent
Executor
Each party specifies a percentage interest in the account. If one party dies, her interest is the account passes to her estate.
TIC
Parties share an undivided interest in the account. If one party dies, his interest passes to the other owner(s) of the account
JTWROS
The assets in the account become the property of the beneficiary on the death of the account owner without passing through probate (it’s the type of account)
TOD
An unincorporated interest of two or more individual. A written agreement specifies which individuals can trade the account.
Partnership account
The most appropriate term to use when referring to a trust that is established upon the death of the grantor is a _________trust
A testamentary trust
_______ investing is when the entity commits a portion of its funds to those companies or industries which align with those goals.
Impact investing
An estate planning tool designed to pass assets to beneficiaries in a way to minimize gift and/or estate taxes.
Grantor Retained Annuity Trusts (GRATs)
If the grantor dies during the term of the trust, the remaining assets are considered part of the deceased’s estate.
