Unit 18 - Type of Client Flashcards
An individual account is for one beneficial owner. What other type of entity can apply for an individual account?
A sole proprietorship
How many days does a broker-dealer have to secure a written agreement (ODD) regarding the risks of trading options?
15 Days
Which business entity makes an individual personally liable for all of the company’s debts?
Sole Proprietorship
Which business entities allow the income or loss to pass directly to the individuals of the company?
Sole Proprietorship, General Partnership, LLC
A general partnership must have at least how many members?
Two Members
What is the primary advantage of having a Sole Proprietorship, General Partnership or LLC?
You avoid double taxation by passing the income directly to the individuals.
A Limited Partnership is comprised of general partners and limited partners. Which group is assigned the management duties and assumes all liabilities?
General Partners
A Limited Partnership is comprised of general partners and limited partners. Which group is passive and has their liability limited to the size of their investment?
Limited Partners
An LLC combines what two benefits?
The benefit of incorporation (limited liability) and tax advantages of a partnership (flow-through taxable earnings/losses).
Unlike an LLC which can have an unlimited number of members, an S Corp is limited to how many shareholders?
100 Shareholders, none of whom can be nonresident aliens.
S Corporations are limited to how many classes of stock?
One class of stock (typically common)
Which business entity is the easiest to transfer ownership from one party to another?
C Corporation - selling shares is rather straightforward
Which business entity is ideal for raising a large amount of capital?
C Corporation
Explain a Durable Power of Attorney
A Durable POA allows the individual to maintain control over the account when the grantor becomes incapacitated.
What is the difference between a Simple Trust and a Complex Trust?
A Simple Trust must distribute all of its income earned from investments in the same year they’re received vs a Complex Trust that can accumulate income.
A Living Trust allows the individual who set up the trust to maintain control over the assets until their death.
Mighty
A Testamentary Trust stipulates that, at death, the property and assets of the trust will be given to specified beneficiaries.
Mighty
A Living Will is the individual’s end-of-life instructions for and has nothing to do with assets.
Mighty
Philanthropic funds may be set up so a high net worth individual can donate a lump sum, take a current tax deduction, and make distributions to charities over time.
Mighty
A Transfer on Death (TOD) Account allows the individual to distribute their assets using percentages for each beneficiary.
While alive the owner is the only person with access to the assets. Individual accounts, JTWROS and tenants by entirety are the only accounts that can be set up as a TOD.
What’s a revocable trust?
The grantor can revoke the trust and take back the assets. Income gains are taxable even if the capital isn’t withdrawn.
What’s an irrevocable trust?
The Settlor must give up all ownership of the property and grant it back to the Grantor.
What is Per Stirpes and Per Capita?
Per Stirpes: If someone in a will is deceased before receiving their distribution from the will, their beneficiaries will receive the deceased’s share.
Per Capita: The shares are distributed evenly across all parties, even if the deceased’s beneficiaries are four individuals. They each receive an even share along with the other beneficiaries.
