MIE chapter 10

MIE chapter 10 - Sole proprietorship simplest form of...

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Unformatted text preview: Sole proprietorship- simplest form of business. Owner is the business, doesn’t create a separate business organization. Over 2/3 of all American businesses. Owner receives all of the profits, assumes all the risk, easier and less costly to start up. Owner makes all decisions. Unlimited liability, no opportunity to raise capital, lacks continuity on the death of the proprietor. Only pays personal income taxes, allowed to establish certain tax exempt retirement accounts. Partnerships-General partnership- an agreement between 2 or more people to carry on a business for profit. Co-owners, joint control of operations and profits. Should be in writing. A partnership is a legal entity. The firm itself does not pay federal income taxes, profit is taxed as individual income. Partners are subject to personal liability for obligations.- Limited partnership- at least one general partner and 1 or more limited partners. A certificate of limited partnership must be filed with state office. General partner- assumes responsibility for the management of the partnership and liability for all partnership debts. Limited partner- no right to participate in the general management or operation and assumes no liability of funds or lawsuits. Corporation- a legal entity formed in compliance with statutory requirements. Owned by shareholders. A board of directors manages the business. Shareholders have limited liability.easy to raise capital through shares of stock. Corporate income is taxed twice, to entity and to shareholders. Deemed to be a citizen of the state where it is incorporated and maintains its principal place of business.- S corporation- is not taxed at the corporate level, only taxed once, when it is distributed to the shareholder owners. 100 or fewer shareholders- qualification requirements for s corporations 1) must be a domestic corporation 2) must not be a member of an affiliated group of corporations 3) shareholders must be individuals, estates, or certain trusts. Partnerships and nonqualifying trusts cannot be shareholders. Under specific circumstances, corporations can be shareholders. 4) must have only 1 class of stock, although not all shareholders need have the same voting rights. 5) no shareholder of the corporation may be a nonresident alien. Limited Liability Company LLC- a hybrid form of business enterprise, offers limited liability of a corporation and tax advantages of a partnership. Formation of an LLC- in compliance with state law. ¼ of states require at least 2 owners/members. Other states, 1 owner is allowed. Articles of organization must be filed with a central state agency. Jurisdictional requirements- usually citizens of every state in which their members are citizens....
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MIE chapter 10 - Sole proprietorship simplest form of...

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