from G TO I - G.Form of ownership SOLE PROPRIETORSHIP Is a...

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G .Form of ownership SOLE PROPRIETORSHIP √ Is a business with one owner and the most common type of organization. √ Is not separate from the owner, but merely a different name with which the owner represents to the public. The owner and the business are inseparable. √ Is easy to form and operate. √ Is more affordable since no legal documents need to be filed in most cases. All you have to do is get a business license and start operations. √ Is a “pass-through” entity. All income and expenses pass-through to, and are filed as, part of the owner’s personal tax return. When there is a business loss, the owner will enjoy a deduction to off-set personal income. √ If the business makes a profit, it will increase the owner’s income by that amount and the owner is responsible for any taxes due. √ Whoever sues the business actually sues the owner. The owner’s personal exposure is unlimited. His personal assets can be taken to pay company obligations. PARTNERSHIP √ Has two or more owners. The details of the arrangement between the partners are outlined in a written document called a partnership agreement. √ Is not a separate legal entity from its owners. However, the partnership can hold property and incur debt in its name. √ Is a pass-through entity and does not pay its own income tax but files an informational tax return with the IRS (Form 1065). The pro-rata share of its income and expenses are shown on each partner’s personal return, and any taxes due are paid by the partners. √ Has the same advantages and disadvantages as the sole proprietorship but with an additional drawback. A partner can be held liable for the acts of the other partners, increasing personal liability. CORPORATION √ Is essentially an “artificial person” created and operated with the permission of the state where it is incorporated. It is a person but only “on paper”. √ Is brought to life as a regular C corporation, by filing a form with a state, known as articles of incorporation. √ √ Must have at least one stockholder. Some states require two or more. √ Actually owns and operates the business on behalf of the shareholder, under the shareholder’s total control. √ √ Protects the owners by absorbing the liability if something goes wrong. When debt is incurred in the company name, owners are not personally liable and their assets cannot be taken to settle company obligations. √ Allows owners to hire themselves as employees and then participate in company funded employee plans like medical insurance. √ Lawsuits can be brought against the company instead of the owners. S CORPORATION √ Is the same as any other business corporation with one important difference- the IRS allows it to be taxed like a partnership, a pass-through entity.
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  • Summer '16
  • Labor Standards Enforcement

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