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The Legal Form of Your Business

The Legal Form of Your Business. Forms of Business Ownership. Sole Proprietorship Partnership Corporation S Corporation. Sole Proprietorship. Advantages Little Government Control Most Common Disadvantages Difficult to Raise Money Private Assets are at Risk. Partnership.

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The Legal Form of Your Business

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  1. The Legal Form of Your Business

  2. Forms of Business Ownership • Sole Proprietorship • Partnership • Corporation • S Corporation

  3. Sole Proprietorship • Advantages • Little Government Control • Most Common • Disadvantages • Difficult to Raise Money • Private Assets are at Risk

  4. Partnership One or more Partners • Advantages • Little Government Control • Share Profits and Losses • Disadvantages • Share Profits and Losses • Liable for Their Partners

  5. Partnership Agreement Name of the Business or Partnership Name of the Partners Type and value of the Investment each Partner Contributes Managerial Responsibilities to be handled by each Partner

  6. Partnership Agreement Accounting Method to be Used Rights of Each Partner to Review and/or Audit Accounting Documents Division of Profits and Losses Among the Partners Salaries to be Withdrawn by the Partners

  7. Partnership Agreement Duration of the Partnership Conditions Under which the Partnership can be Dissolved Distribution of Assets Upon Dissolution of the Partnership Procedure for Dealing with the Death of a Partner

  8. Corporation • Independently of its Owners • Legal Rights of a Person • Corporations Pay the Taxes • Not the Owners • Enters into Contracts • Liable for Negligence

  9. Corporation • Share of Stock (Unit of Ownership) • Shareholders or Stockholders • Board of Directors • Elects Senior Officers • Determines Salaries • Sets Rules for Conducting Business • Sets Dividends

  10. Advantages • Liability • Only what You have Invested • Allowed to Sell Stock • Lenders more Willing to Lend • Shareholders do NOT Affect Day-to-Day Running of the Business

  11. Disadvantages • Very Complicated (You have to Incorporate) • Lawyers • Chartering • Registering • Costly • More Government Regulations • Income Taxed Twice

  12. S Corporation • Organized Under the Subchapter S of the Internal Revenue Code • Taxed as a Partnership • Done Because Most Businesses Lose Money the First 3 Years • Tax Purposes

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