LEGL - Ch. 14 (Part II)

LEGL - Ch. 14 (Part II) - Business Organizations Business...

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Unformatted text preview: Business Organizations Business Organizations Chapter Fourteen Business Organizations Business Organizations Factors to consider when selecting an organizational form: Creation Continuity Managerial Control Liability Taxation Business Organizations Business Organizations Primary Organizational Forms: Sole Proprietorships No formal documentation required No continuity Owner is in total control of business operations Owner is personally liable for any debts All income generated by the proprietorship is subject to the owner’s personal taxes Business Organizations Business Organizations Primary Organizational Forms: Partnerships Formed when the owners share a common interest and profits/losses Dissolved with any change in partnership unless otherwise agreed Partners have complete managerial control All partners are personally liability for the entire debt of the partnership Each partner must pay personal income tax for his share of all partnership profits and losses Business Organizations Business Organizations Primary Organizational Forms: Corporations Articles of incorporation = The basic charter of a corporation which spells out the name, basic purpose, incorporators, amount and types of stock, and any special characteristics Business Organizations Business Organizations Primary Organizational Forms: Corporations Control of the Corporation: Shareholders Board of Directors Fiduciary duty Officers Business Organizations Business Organizations Primary Organizational Forms: Corporations Liability – Shareholder personal liability is generally limited to investment spent to purchase stock Piercing the corporate veil Taxation – Corporation is taxed for all income Shareholders are also taxed for any income distributed as a dividend Business Organizations Business Organizations Review of Primary Organizational Forms: Sole proprietorship Partnership Only one owner Personal liability Owner taxed for proprietorship income personally Two or more owners Unlimited personal liability for the entire partnership’s debts Owners must pay personal income tax for their share of profits Corporation Unlimited number of owners through shares of stock Liability is generally limited to shareholder’s stock investment Income is potentially taxed twice Business Organizations Business Organizations Hybrid Organizations Limited Partnerships Allows for limited partners who are not liable for debts, but do not control the business S Corporations Similar to a corporation, only treated like a partnership for income tax purposes Business Organizations Business Organizations Hybrid Organizations Limited Liability Organizations Limited Liability Companies Control – Managed equally by members via majority vote, unless otherwise agreed Liability – Members are generally not personally liable for the LLC’s debts Taxation – Taxed like a partnership, rather than a corporation Limited Liability Partnerships Business Organizations Business Organizations Selecting an Organizational Form Can be a difficult decision, as each form provides certain benefits The LLC is increasingly popular ...
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This note was uploaded on 09/21/2011 for the course LEGL 2700 taught by Professor Reed during the Spring '07 term at UGA.

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