189_CH20

189_CH20 - Sole Proprietorships 1. An unincorporated...

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Sole Proprietorships 1. An unincorporated business owned by a single person a. Easy, and inexpensive to create and operate b. Don’t need to register don’t file separate tax 2. Serious Disadvantages a. Owner of the business is responsible for all the business’s debts i. Owner is personably liable b. Owner of business has limited options for financing business i. Cannot issue stock or get money from outside (if someone else gives money, now a partnership) Corporations 1. Corporations in General a. Limited Liability i. Shareholders of a corporation have limited liability, meaning they can lose their investment, but not their assets ii. Being a shareholder, however, does not protect you from your own misdeeds b. Transferability of interests i. Corporate stock can be easily bought and sold c. Duration i. Corporations have perpetual existence—continue after death of founder d. Taxes i. Corporations are taxable entities—pay taxes on their profit. Shareholders must also pay taxes on dividends. Thus, often considered Double taxation 2. Close Corporation or Closely Held Corporation (state law) a. A company whose stock is not publicly traded—statutes vary from state to state b. Protection of Minority Shareholders i. Protection for minority shareholders—often require unanimous vote c. Transfer Restrictions i. Must first offer shares to the other owners before selling them to an outsider d. Flexibility i. Can operate without a board of directors e. Dispute Resolution
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189_CH20 - Sole Proprietorships 1. An unincorporated...

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