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25 Cards in this Set
- Front
- Back
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Sole Proprietor |
a business owned as a natural person |
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Advantages of opening your business as a sole proprietorship: |
- Faster, cheap setup. No meetings, flow through income |
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Disadvantages of a sole proprietorship |
- Personal liability - Harder to obtain loans or attract investment capital due to lower financial controls (financial statements and minutes not required) |
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General partnership |
a pass-through entity that provides no protection to the owners against debts and lawsuits
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General partnership advantages |
flow-through of income, expenses |
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GP disadvantages |
personal liability |
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Limited partnership |
form of business ownership in which income and expenses flow through directly to the partners rather than to a separate business entity
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LP advantages |
flow-through income, expenses; no liability |
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LP Disadvantages
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Must have one GP, with unlimited liability
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LLC (Limited Liability Company) |
form of business ownership in which the owners, called members, receive their share of income/loss and receive protection against personal liability
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LLC Advantages |
flow-through of income, expenses, limited liability, more flexible profit distributions, no minutes, avoids double taxation of income |
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LLC disadvantages |
not good for attracting VC |
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S-Corp |
a form of business ownership with a maximum # of shareholders who receive a share of income/loss and also protection of personal assets |
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S-corp advantages |
flow-through of income, expenses, no personal liability |
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S-corp disadvantages |
annual meetings, not good for attracting VC, one class of stock |
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C-corp
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traditional corporate structure. The corp gets taxed on all profits, and shareholders also get taxed on the dividend income. |
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C-corp advantages |
Attracts capital, no personal liability even for negligence while running the business
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C-corp disadvantages |
double taxation of income, annual meetings |
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partnership |
a flow-through business entity established as either a a general or limited partnership, in which the owners - not the business itself - are taxed on their share of any net income
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general partner (GPs) |
the owner of a General Partnership or the manager of a limited partnership with unlimited liability and a fiduciary obligation to the limited partners
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Limited partner (LPs) |
person who owns a limited partnership interest. Has no managerial responsibility and is shielded from debts of - and lawsuits against - the partnership
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recourse note |
obligation of a limited partnership for which a limited partner is responsible personally beyond any collateral pledged to secure the loan |
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non-recourse note |
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partnership democracy |
term referring to a limited partner's right to vote in certain matters of major importance
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operating agreement |
document governing the structure and operation of an LLC
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