Types of Business Ownership

Question 1

There are six basic types of business organizations:

Answer 1

a. Sole proprietorship
b. General partnership
c. Limited partnership
d. Corporations
e. S-Corporations
f. Limited Liability Corporation

Question 2

A. Sole Proprietorship:

Advantages of Sole Proprietorship:

Answer 2

a. Easy to establish
b. Freedom from government stipulations
c. Minor investment to get started
d. Owner determines how profits are used

Question 3

Why is a sole proprietorship dangerous:

Answer 3

Owner liable for all debts

Question 4

Sole proprietorship liability includes:

Answer 4

Liability includes personal assets

Question 5

When does sole proprietorship end?

Answer 5

Death upon the owner

Question 6

Sole Proprietorship taxes:

Answer 6

Income tax is computed at normal individual rates on all

the earnings of the business.

Question 7

General Proprietorship:

Answer 7

A general partnership is the unincorporated association of two or more parties who join together as co-owners in order to establish a business for profit.

Question 8

General Proprietorship advantage:

Answer 8

Merges assets, credit, equipment, and talents.

Question 9

What does a General Proprietorship do?

Answer 9

Increases the capacity for bonding and bidding

Question 10

What do partners of General Proprietorship do?

Answer 10

All partners share in decision making and profits.

Question 11

General Proprietorship taxes:

Answer 11

A general partnership pays no income tax.

Partners pay income taxes at the normal individual rate.

Question 12

General Proprietorship liabilities?

Answer 12

Each partner is liable for the business debts of the other partners.

Question 13

When does General Proprietorship end?

Answer 13

A general partnership ceases with the death of a partner.

Question 14

General Proprietorship decision making:

Answer 14

Business decisions have to be agreed upon by all partners.

Question 15

Limited Partnership:

Answer 15

A limited partnership allows an individual to invest in a general partnership but have no input to how the partnership is operated.

Question 16

Limited Partnership liabilities:

Answer 16

Limited liability based on investment

Question 17

Why would someone want to use a Limited Partnership which does not allow any input on how the partnership is operated?

Answer 17

Shares in the profits.

Question 18

Limited Partnership Taxes

Answer 18

LLP pays no taxes

Partners pay income taxes at the normal individual rate.

Question 19

Disadvantage of Limited Partnership

Answer 19

Requires complex legal documentation and Compliance with state and federal regulations.

Question 20

Corporation:

Answer 20

A corporation is a business type where-by one or more
individuals unite to form one entity. Upon meeting state
corporation requirements in reference to filing, the corporation
is regarded as being separate from the individuals that created it.

Question 21

Corporation liabilities:

Answer 21

Limited liability

Question 22

Which type of business is not affected by the death of a stock holder?

Answer 22

Corporation

Question 23

Corporation advantages:

Answer 23

Raising capital is not hindered by regulations.

Question 24

Corporation taxes:

Answer 24

Corporation Pay taxes only on earnings. (Corporate Tax)

Shareholders pay taxes on dividends received. (double taxation)

Question 25

S-Corporation:

Answer 25

A S-Corporation is a corporation which has met I.R.S. requirements to receive the benefits of being taxed as a partnership rather than a corporation.

Question 26

S-Corporation: requirements include:
a.
b.
c.

Answer 26

a. Have no more than 100 shareholders
b. Must be U.S. citizens
c. There can only be one outstanding stock

Question 27

S-corp Taxes:

Answer 27

S-Corporations pay no corporate taxes, however shareholders pay taxes on
dividends. (Income Tax)

Question 28

Limited Liability Company:

Answer 28

Limited Liability Company has the limited liability of a corporation and the tax advantage of a partnership. The LLC has
less legal requirements and more tax and economic benefits.

Question 29

LLC taxes:

Answer 29

The owner pays taxes on earnings as an individual, not as a corporation.

Question 30

Joint Venture:

Answer 30

Several (Business Members) come together to form a new business entity larger and financially stronger than if they acted alone.

Question 31

What does a joint venture do:

Answer 31

The joint venture combines talents & resources in order to carry out a single
defined project.