Business Entities - I. Business structure (17%23%) A....

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I. Business structure (17%–23%) A. Advantages, implications, and constraints of legal structures for business 1. Sole proprietorships and general and limited partnerships Sole Proprietorships - A proprietor doing business under a fictitious name is usually required to make a d/b/a or “doing business as” filing under state law. Partnerships - An association of two or more persons conducting a business that they co-own for profit. Absent association by agreement of at least two persons as partners, there is no partnership. - A limited partner’s liability for partnership obligations is limited to his/her capital contributions to the business, whereas a general partner has unlimited personal liability for partnership debts. 2. Limited liability companies (LLC), limited liability partnerships (LLP), and joint ventures Joint Ventures - The most significant difference between joint venturers and partners is that joint venturers have less implied and apparent authority to bind their associates due to the limited scope of the joint venture. Thus, an advantage of the joint venture is that no joint venture is liable for similar activities of other joint ventures outside the scope of the venture. - Unlike a partnership, a joint venture does not carry on a business. The joint venture is an association of persons to undertake a specific business project for profit. - Does not require the filing of organization documents with the state. LLP - Limited partnerships, LLPs, and LLCs are all legally separate from their owners. Such an entity may enter into contracts, sue, be sued, and own property in its own name. LLC - An LLC has a hybrid business structure; it combines the limited liability of the corporation with the tax advantages of the general partnership. Its profits are not
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taxed at corporate rates if the members elect to be taxed as partners. Its profits are generally passed through to its shareholders and taxed at their individual rates. 3. Subchapter C and subchapter S corporations - The close corporation furnishes not only the usual advantages of the corporate form but also various advantages of partnerships, such as active participation in the business by owners, security of control, and choice of current and future associates. - A close corporation has relatively few shareholders, the shares are not publicly traded, and the owners are usually involved in management. Some state statutes are not drafted to allow the flexibility and simplicity needed by organizers of a close corporation. However, the close corporation is a separate legal entity: It may sue and be sued, own property, make contracts, and exercise a wide range of rights in its own name. -
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Business Entities - I. Business structure (17%23%) A....

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