1. [LO 1] What are the most common legal entities used for operating a business? How are these entities
treated similarly and differently for state law purposes?
Corporations, limited liability companies (LLCs), general and limited partnerships
1. (LO 1) In general terms, identify the similarities and differences between the corporate taxable income formula
and the individual taxable income formula.
Similarities: Both formulas start with gross income (income after exclusions) for the
[LO 1] Discuss the difference between gain realization and gain recognition in a property transaction.
Gain realization occurs when a transaction takes place (that is, there has been an exchange of property
rights between two persons) and th
1. [LO 1] What is a flow-through entity, and what effect does this designation have on how business
entities and their owners are taxed?
Flow-through entities are entities that are not taxed on the entity level; rather, these entities are taxed
1. [LO 1] Joey is a 25% owner of Loopy LLC. He no longer wants to be involved in the business. What
options does Joey have to exit the business?
Answer: Joeys two most common options are to sell or exchange his interest in the LLC to a third
[LO 1] In general terms, how are C corporations different from and similar to S corporations?
S corporations are incorporated under state law and thus have the same legal protections as C
corporations. They are governed by the same corporate