Chapter 1 Questions

Question
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Answer
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a. Proprietorship: A business structure in which an individual and his/her company are considered a single entity for tax and liability purposes. A proprietorship is a company which is not registered with the state as a limited liability company or corporation. The owner does not pay income tax separately for the company, but he/she reports business income or losses on his/her individual income tax return. The owner is inseparable from the proprietorship, so he/she is liable for any business debts. Partnership: a relationship of two or more entities conducting business for mutual benefit. Corporation: The most common form of business organization, and one which is chartered by a state and given many legal rights as an entity separate from its owners. This form of business is characterized by the limited liability of its owners, the issuance of shares of easily transferable stock, and existence as a going concern.
b. limited partnership: A business organization with one or more general partners, who manage the business and assume legal debts and obligations, and one or more limited partners, who are liable only to the extent of their investments. Limited partners also enjoy rights to the partnership's cash flow, but are not liable for company obligations.
Limited Liability Partnership: (LLP) Another name for a Limited Liability Company, often used by professional associations. The partner or investor's liability is limited to the amount he/she has invested in the company. professional corporation: A legal structure authorized by state law for a fairly narrow list of licensed professions, including lawyers, doctors, accountants, many types of higher-level health providers and often architects. Unlike a regular corporation, a professional corporation does not absolve a professional for personal liability