Section_1 - Homework Section 1 Solutions Forms of Business...

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Homework – Section 1 Solutions Forms of Business Ownership and the Role of Accounting 1. List at least two advantages and disadvantages of each of the following forms of business: sole proprietorship, general partnerships, C-corporations, S-corporations, and limited liability companies. See chart summarizing the different forms. 2. Compare and contrast these three different types of partnerships: general partnerships, limited partnerships, and limited liability partnerships. See chart summarizing the different forms. 3. Wolfpack Inc. is a C-corporation with before-tax earnings of $40,000 in 2007. The corporation has an average tax rate of 15%. a. How much tax will the corporation pay on its earnings? $40,000 x 15% = $6,000 b. If the corporation pays out 40% of its current year’s after-tax earnings as a dividend, and if the individual shareholders have an average tax rate of 25%, how much total tax will be paid in 2008 from both the corporation and its shareholders? Amount paid out = ($40,000 - $6,000) x 40% = $13,600 Tax on amount paid to individual shareholders = $13,600 x 25% = $3,400 Therefore, total tax paid = $6,000 (corp) + $3,400 (indiv) = $9,400 4. True or False: All C-corporations are regulated by the Securities and Exchange Commission (SEC). False – only publicly held. 5. True or False: The Securities and Exchange Commission (SEC) gives advice to the public regarding which investments are profitable. False –they do not give investing advice. 6. True or False: Most C-corporations can easily qualify to become an S-corporation with very little effort. False 7. True or False: The owners of a limited liability company (LLC) are called partners. False – they are called “members”.
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Section_1 - Homework Section 1 Solutions Forms of Business...

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