Unincorporated business owned by a lone individual. The entrepreneur here pays taxes on the business through his or her personal tax returns
The identity of these are separate from that of the shareholders who own it. This means that these, and not shareholders, are legally liable for any indebtedness and/or actions of the corporation
Designated based on Subchapter S of Chapter 1 of the Internal Revenue Code. Filing as this allows a business to avoid double taxation—once on the corporation profits and again on the shareholders
Relationship between the owner of a trademark, service mark, trade name, or advertising symbol and an individual or group that wants to use this identity as part of a business
Organization owned and operated by people who use its services; they are designated as members, or user-owners. Profits and earnings of the are distributed among the members
Value of money that has been used to produce something—afterward, this money is not available for use anymore
Benefit of Sole proprietorship
simple TAXES, HEALTHCARE reimbursement arrangements, EFFICIENCY, INDEPENDENCE and HOME OFFICE expenses are tax-deductible, thus less to pay
Cost of Sole proprietorship
The owner has limited ways to raise capital. Potential investors in the business cannot buy stock (there is no stock), making investment difficult to define and document
Cost of Sole proprietorship
The owner has unlimited liability and can lose personal assets along with business assets. If there are employees, their mistakes may create liabilities for the business
Staying as a small, family business with few or no ____________________, would be a good choice against risks and costs of sole proprietorships
Benefit of Partnership
Acquisition of capital can be easier in this sort than in a corporation since individuals often receive better loan terms
Cost of Partnership
Unlimited liabilities, potential conflict between the two, and Ownership cannot be transferred unless all members agree
Limited liability company
A special form of business organization that combines advantages of a corporation and a partnership; THEY ARE NOT TAXED
Benefit of Cooperative
Members receive reduced costs for products and/or services due to the economy of scale provided, and they cannot incur personal liabilities
Cost of Cooperative
Everyone will likely not all be happy with the decisions made by the group and the decision-making process may be slow.
It can be difficult to attract large investments since every member's vote carries equal weight regardless of the size of each member's investment
Legal principle holding investors responsible for a firm's debts only to the limits of their personal investments in it
Benefit of Franchise
May provide the resources (e.g., financing assistance, training, marketing, and management expertise) necessary to assure success, and has exclusive rights to operate the business within a defined area
Cost of Franchise
The price of it may be very high;
there is very limited flexibility on how to run the business
Qualifications for s corp
be a domestic corporation
have only allowable shareholders
include individuals, certain trusts, and estates
not include partnerships, corporations, or nonresident alien shareholders
have no more than 100 shareholders
have one class of stock (all shares must have same dividends and voting rights per share)
not be an ineligible corporation
Benefits of s corp
Lower taxation of the business owner is a significant feature of it. The shareholder, who also is an employee, pays taxes on wages but also receives a dividend from the corporation for his stock, which is usually taxed at a lower rate. The corporation itself is not taxed because they "pass through" to the owners' income taxes.
The shareholders/employees can write off business expenses.
The shareholders are protected from liabilities incurred by the corporation.
Since up to 100 shareholders are permitted, there are more opportunities to raise capital.
Accounting rules can be simpler, compared to C corporations
Cost of s corp
Required to operate under strict processes, such as holding board of directors' and shareholders' meetings and keeping detailed records—similar to the demands on C corporations.
Compensation requirements include a careful accounting for the wages and distributions of shareholder employees. A shareholder is required to receive reasonable compensation for services rendered to the corporation, even if the corporation is not making a profit.
Shareholders will be taxed for income the corporation makes, even if they do not receive any of that income
Benefits of C corporation
Raise capital by selling shares of the business to prospective shareholders in exchange for money, property, or both; limited liability
Costs of C corporation
Double-taxed; profits are taxed at the corporate level and again when distributed to shareholders as dividends; expensive to tax and regulate
Example: Carlos shares the business with one or more other individuals and everyone's personal assets are liable to the business
Limited Liability Company
Example: Carlos and his associates want to change the company to a form that will decrease their liability but retain maximum control
Example: Carlos and his associates wish to change the business structure to retain limited liability but add more ability to raise capital
Example: Carlos and his associates wish to change the business structure to separate taxes for the corporation from personal taxes
Any of the equal portions into which the capital stock of a corporation is divided and ownership of which is evidenced by a stock certificate
Both LLC and S corporations allow owners to report business profits and losses on their personal _____ ______________
Business owned by stockholders who share in its profits but are not personally responsible for its debts
Partnership for a limited purpose. Companies don't combine permanently only on a specific project, Government will usually permit.
According to the IRS, which is NOT one of the four characteristics of a C corporation?
A. Limited liability
B. Continuity of life
C. Centralization of management
D. profits taxed only on owner's return