Business Law Chapter 32

Business Law Chapter 32 - Business Law Chapter 32 Starting...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Business Law Chapter 32 Starting a Business: LLCs, and Other Options Sole Proprietorships - Most common form of business - Sole Proprietorship - it is an unincorporated business owned by a single person. - Easy and inexpensive to create and operate, no need to hire lawyers or register with government, no required to file separate tax return – all profits and losses are reported on owners personal return. - States generally require sole proprietors to register business name if it is different from their own. - Major disadvantages: o Owner is responsible for all business’s debts –owner is personally liable o Owner has limited options for financing business – debt is only source of working capital because there is no stock or memberships to sell o If someone else brings in capital and helps with management then it turns into a partnership - Sole proprietorships work best for small business without large capital needs Corporations - Dominant form of organization- because they have been around for a long time and they are numerous, the law that regulates them is well developed - State laws regulate corporations but federal statutes determine their tax status. - Federal tax code provides more favorable tax treatment to some small corporations and calls them S corporations (scorps). Corporations in General - Limited Liability o Limited liability does not protect against all debts – individuals are always seen responsible for their OWN acts o Corporation protects managers and investors from personal liability for debts of the corporation and actions of others, but not against personal negligence. - Transferability of Interests
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
o Corporations provide flexibility for all enterprises small (one owner) and large (thousands of shareholders). o Corporate stock can be bought and sold easily - Duration o Corporations have perpetual existence, they continue without their founders unlike like sole proprietorships - Logistics o Corporations require substantial expense and effort to create and operate o Corporations must hold annual meetings for shareholders and directors – minutes of meetings must be kept indefinitely in company minute book. - Taxes o They are taxable entities and must pay and file taxes and returns. o They pay income tax on profits – shareholders then pay tax on dividends from corporation Thus a dollar is taxed twice before a shareholder can deposit it o Sole proprietors are taxed on person income that is generated as gains from business o For partners, taxes are passed into the income of partners and they have income taxes levied on it. o Corporate tax rate at top rate is 35% and for shareholders it is 15% ** so IRS pockets 45% of all money corporations make and distribute to shareholders as dividends Close Corporation - Close corporation – a company whose stock is NOT publically traded. Aka closely held corporation. It is a privately held company. -
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 12

Business Law Chapter 32 - Business Law Chapter 32 Starting...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online