You have a acct 511 db 2 - You have a good friend named...

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You have a good friend named Frank who is planning to form a new business. He comes to you for advice. He is a Christian, and he wants to obey God in the operation of his business. He is concerned as to whether Christians should attempt to minimize their tax burdens, after all, "Render unto Caesar that which is Caesar's," right? Further, he is concerned as to what liability protection really means and whether a Christian should use an entity that provides for liability protection. He fears that by using such an entity he might be shirking his personal responsibilities. In order to help Frank with his decision, answer the following questions: 1. Define what is meant by the concepts of limited liability, and/or liability protection. When choosing a business structure, there are many important factors to consider. “Many factors should be considered, including taxes, liability risk, tax, and fisccal year-end, ownership structure, estate planning,business risks, and earnings and property distribution” [Wil112]. Since Frank has decided which structure he thinks works best for him, it is our job to clarify the advantages and disadvantages that he may face. Limited Liability Companies are in a group of hybrid business structures that “…have evolved in response to liability issues and tax treatment…”[Spi13]. The legal structure of a limited liability company provides the same limited liability to the members of the LLC as corporations do and the flexibility of a partnership. This allows the safety from the company liabilities to the extent that only the their investment is liable if a company owes money. Personal possessionas are not allowed to be taken to satisfy the liability of the company. The owners do have liabilities, but only those that are intwined with the company itself. After looking at some of the possible risks that Frank is going to experience over the life of the business, it is important that he look at the advantages that he woul receive from having an LLC over a sole ownership or partnership. Some of these risks are personal liability
for debts, actions made by the company, actions made by Frank, and the personal debts of other members [SJF14]. Another benefit that is offered by a limited liability company is in regard to federal taxes. As far as federal taxes are concerned, LLCs are treated as pass through companies. They receive treatment similar to that of a partnership instead of a corporation. This means that all profits and losses are reported on the members’ federal tax returns. This is an advantage to the owners as they are not required to pay double taxes like some of the other business structures would. The tax burdens would be a good deal smaller for an LLC compared to some other structures that

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