Sole Proprietorships
What is a sole proprietorship and how does it differ from other forms of business?
Owned by a single person and there's no legal distinction between owner and business
What are the two main types of partnerships?
General and Limited Partnerships
What kind of Liability protection does an LLC have
Limited Personal Liability
This legal feature of a corporation protects owners' personal assets from business debts, even if the company goes bankrupt?
Limited Personal Liability
Chapter 7 & 13 bankruptcy can stop these three things:
Creditor Harassment, Lawsuits, Repos
What is 1 advantage and 1 disadvantage of a sole proprietorship?
A: Easy, inexpensive, full control, simple taxes
D: Unlimited liability, limited capital, business ends at owner's death
How are expenses treated for partnerships?
Expenses are typically deductible from the partnerships income before distribution to partners
What are the two ways a LLC can be taxed?
These are the two primary tax classifications corporations can choose from.
S-Corporation or C-Corporation
Which type of bankruptcy does not force you to sell your personal assets?
Chapter 13
What kind of liability does a sole proprietor have and how can they be protected?
Unlimited liability
Protect by buying insurance or try to create some form of separation
What are some rights that partners typically have in a partnership?
Participate in management, share of profits, access to partnership records
Do employees of an LLC taxed as a C corporation have to pay self employment taxes?
No, employees are only taxed the normal 7.65% and the employer will pay the other half
Which tax classification allows eligible corporations to avoid double taxation and distribute profits directly to owners?
S Corporation
If your income is lower than the median income, or you lack disposable income to pay off debts, you pass which test, for which type of bankruptcy?
Chapter 7 Means Test
How does a sole proprietor report income and pay taxes?
All income and taxes are passed to the owner
What is the liability of partners in a general partnership?
Partners have unlimited liability for their share of debts and losses
Can an LLC change its tax status after it has initially elected one?
Yes, generally the LLC can't change their tax status for another 60 months after the last change however.
What restriction limits S corporation ownership to a specific group of investors?
They only have one class of stock and no foreign owners. S corporations can only have one class of stock (all shares have equal rights) and cannot have non-resident alien shareholders, which simplifies their tax filing process.
Of the following assets, which would be exempt from being stripped from you? A) Clothing, B) Jewelry, C) Collections of stamps or coins, D) Household Appliances
C) Collections of stamps or coins
Can a sole proprietor hire employees, and if so, what are the tax obligations?
Yes, employees must pay self-employment taxes along with income taxes
What mechanisms are available for resolving disputes between partners?
Mediation, arbitration, or litigation depending on the partnership agreement
One of the owners of a LLC that is taxed as a partnership has income from the business of $184,000.
How much will they pay in FICA(employment taxes)?
Hint:(Check income limits)
$25,795.80
Under what conditions can a corporation elect S-Corp tax treatment?
Under 100 shareholders, one class of stock, no foreign owners
Chapter 7 and Chapter 13 can both erase all of the following except for…
Credit card debt, debit card debt, medical bills, and personal loans