Course Hero Outline Corporate and Partnership.docx -...

Corporate & Partnership Tax Outline
I. OVERVIEW OF BUISNESS ENTERPRISE
a. Categories of Businesses
i. Partnerships
1. Partnership = a business owned by two or more persons as co-owners
a. Includes a syndicate, group, pool, joint venture, or other unincorporated
organization through or by means of which any business, financial operation,
or venture is carried on, and which is not, within the meaning of this title, a
corporation or a trust or estate. [ § 706(a) ].
2. Subchapter K
3. General Partnerships
a. All partners have unlimited liability for the businesses debt
4. Limited Partnerships
a. The limited partners are protected from personal liability
b. The General Partner has unlimited liability for the businesses debt
5. Limited liability Partnerships
a. All members are protected from liability for the businesses debt
6. Limited Liability Company
a. Unincorporated entity in which the owners, called “members” have limited
liability
ii. C Corporations
1. Subchapter C
2. Large Businesses, publically traded corporations
3. Has a Double Tax Regime
iii. S Corporations
1. Subchapter S
2. Smaller corporations; do very little business
b. Conceptual Taxation Models
i. Aggregate Concept
1. A partnership would not be recognized as an independent taxable entity. Each of the
partnership owners holds a direct undivided interest in the assets and operations of the
enterprise
2. The partnerships income and deductions would be treated as directly earned or
incurred by the partners
3. Distributions would be nontaxable because the partners would be viewed as receiving
income, which was previously taxed.
ii. Entity Concept
1. Would resemble the treatment of corporations in Subchapter C.
2. A business organization is viewed as an entity that is separate and distinct from its
owners.
3. Entity is subject to tax on its taxable income, and transactions between the owners
and the entity are taxable events (double tax).
a. Distributions of corporate profits are taxable to the Shareholders.
iii. Hybrid Concept
1. Treating an organization as a separate entity for some purposes (determining income,
filing of tax returns), and as an aggregate for other purposes (passing through income
and expenses to owners and by treating a sale of an interest in the organization as a
sale of the owner’s proportionate share of each asset).
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II. Entity Classification
a. Choices
i. Sole Proprietorship
ii. Corporation
1. Generally, shareholders and not personally liable for Corps debts
2. Double tax regime
a. Tax imposed on both the Corporation and Shareholder
iii. Partnership
1. General Partnership
2. Limited Partnership
3. Limited Liability Partnership
4. Limited Liability Company
a. Limit liability and use single tax regime
iv. Differences
1. Liability
a. Corps  generally not personally liable
b. Partnerships  some may be personally liable
2. Federal income tax
a. Corps  Double tax regime
i. Section 11
ii. Individual rates are higher than capital gain rates
b. Partnerships  Single tax regime
v. Ways to reduce Corporate level tax
1. Eliminate corporate income by giving salaries
2.