IOE 422 W2010 Class 10 021810

IOE 422 W2010 Class 10 021810 - Winter 2010 Kurt Skifstad

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Unformatted text preview: Winter 2010 Kurt Skifstad (skifstad@umich.edu) I O E 4 2 2 E n t r e p r e n e u r s h i p 1Class 10 1 Class #10 Legal Formation and IP, Project 1 & Elevator Pitch Kurt Skifstad skifstad@umich.edu Class10 1 Winter 2010 Kurt Skifstad (skifstad@umich.edu) I O E 4 2 2 E n t r e p r e n e u r s h i p 2Class 10 2 The Corporation Corporation legal entity separate form its owners Ownership represented by shares of stock Why Incorporate? Limit Liability Tax Advantages Winter 2010 Kurt Skifstad (skifstad@umich.edu) I O E 4 2 2 E n t r e p r e n e u r s h i p 3Class 10 3 Legal Form Impacts the business, tax, and capital-raising objectives of the company Key Considerations: Number of owners Number and type of investors Need to raise capital Accounting- and Tax- related issues Health care and retirement issues For tax purposes, two types of forms: Taxable corporation Flow-through entities Winter 2010 Kurt Skifstad (skifstad@umich.edu) I O E 4 2 2 E n t r e p r e n e u r s h i p 4Class 10 4 C-corporation For tax purposes: Taxable Corporation - both corporate profits and distributions to shareholders are taxed (double-taxation) Can be sold or merged into another corporation with a tax-free exchange of stock Multiple classes of stock No limit to the number of shareholders Shareholders can be any individual or corporate entity Winter 2010 Kurt Skifstad (skifstad@umich.edu) I O E 4 2 2 E n t r e p r e n e u r s h i p 5Class 10 5 S-Corporation For tax purposes: Flow-through entity Personal liability limited to the amount of capital contributed Initial losses flow through to owners (and can offset other income) S-corp status established by filing with the IRS Winter 2010 Kurt Skifstad (skifstad@umich.edu) I O E 4 2 2 E n t r e p r e n e u r s h i p 6Class 10 6 S-Corp (continued) One class of stock Maximum 100 shareholders Shareholders must be US citizens / residents, not corporations Perpetual Winter 2010 Kurt Skifstad (skifstad@umich.edu) I O E 4 2 2 E n t r e p r e n e u r s h i p 7Class 10 7 Limited Liability Company New kid on the block (in the US anyway 88-96) modeled on GmbH structure (1892) hybrid between partnership and corporation For tax purposes: Flow-through entity single owner LLCs treated as Sole Proprietorships, multi-owner LLCs treated as Partnerships Personal liability limited to the amount of capital contributed Winter 2010 Kurt Skifstad (skifstad@umich.edu) I O E 4 2 2 E n t r e p r e n e u r s h i p 8Class 10 8 LLCs (continued) Members / Interest (shareholders / stock) No limit to the number of members Initial losses flow through to owners (and can offset other income) Can convert to S- or C-Corp Dissolves on death of a member or bankruptcy Winter 2010...
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This note was uploaded on 04/05/2010 for the course IOE IOE 422 taught by Professor Skifstad during the Winter '10 term at University of Michigan.

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IOE 422 W2010 Class 10 021810 - Winter 2010 Kurt Skifstad

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