Chapter+12+_Business+Entities_ - Chapter 12 Business...

This preview shows page 1 - 9 out of 31 pages.

Chapter 12Business EntitiesOverview
Selecting a Business EntitySelecting a Business Entity
What Entity Form Is Best for a New Business?
Chapter 16, Exhibit 1
Various Business Formssquare6Business operations can be conducted in a number ofdifferent forms includingrhombus6Sole proprietorshipsrhombus6Partnershipsrhombus6Partnershipsrhombus6Trusts and estatesrhombus6S corporationsrhombus6Regular corporations (also called C corporations)
Sole Proprietorshipsquare6Not a separate taxable entitysquare6Income reported on owner’s Sch. C
Partnershipsquare6Separate entity, but does not pay taxrhombus6Files information return (Form 1065)square6Partnership ordinary business income (loss) and separatelyreported items are allocated topartners according to theirprofit and loss sharing ratiosrhombus6Each partner receives a Schedule K–1pentastar2Reports partner’s share of partnership ordinarybusiness income (loss) and separately stated itemsrhombus6Each partner reports these items on his or her own taxreturn
S Corporationsquare6Separate entity, only pays special taxes (e.g., built-in gains)rhombus6Files information return Form 1120Ssquare6Similar to partnership taxationrhombus6Ordinary business income (loss) flows through to the shareholdersto be reported on their separate returnsCertain items flow through to the shareholders and retain theirrhombus6Certain items flow through to the shareholders and retain theirseparate character when reported on the shareholders’ returns.square6The S corporation ordinary business income (loss) and the separatelyreported items are allocated to the shareholders according to theirstock ownership interestssquare6May not have no more than 100 shareholders (non-resident aliens notallowed).square6May only issue one class of stock
C Corporationsquare6C corporations are subject to an entity-level Federal incometax which results in what is known as adouble taxationeffect.rhombus6C corporation reports its income and expenses and computes taxon the taxable income reported on its Form 1120on the taxable income reported on its Form 1120rhombus6When corporation distributes its income, the corporation’sshareholders report dividend income on their own tax returnspentastar2Thus, income that has already been taxed at the corporate level is also taxedat the shareholder level

Upload your study docs or become a

Course Hero member to access this document

Upload your study docs or become a

Course Hero member to access this document

End of preview. Want to read all 31 pages?

Upload your study docs or become a

Course Hero member to access this document

Term
Fall
Professor
fabioambrosio
Tags
Accounting, Business, Taxes, Corporation, Types of business entity, Limited Liability Company, general partnerships

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture