Introduction to Accounting Preparing for a User’s Perspective What are the common forms of business ownership structure in the United States and what are some advantages and disadvantages of each? Debits and Credits Trainer Partnerships By Kevin C. Kimball, CPA with support from www.canvas.net Free Jan. 2014 Available on the Google Play Store
Shared Decision-Making Authority WE make the decisions. Partner >= 2 And we are the 2. And what WE say rules! Who are the partners in this business? Hey, I don’t agree!! Partner 1 Partner 2
Easy Set-up >=2
Stop!! You need a license to do business here. Minimal Regulations Stop!! You need a license to do business here. Sales Taxes $ Excise Taxes $
employees = more taxes & regulations Minimal Regulations employees = more taxes & regulations 830 Punchbowl St. < 1 hour
Click here for another example. Minimal Regulations Click here for another example.
SEC? No! No law requires me to report to them. IRS? Yes! Tax law requires me to report to them. Creditors? Yes! My contract requires me to report to them. Turn in your financials!! Turn in your financials!! Turn in your financials!! Elisse B. Walter SEC Chairman since 2012 Creditors & others with contracts Internal Revenue Service
You report $50. I’ll report $50. We each get taxed ONCE! Corporations Single Taxation Partnerships Double taxation You report $50. I’ll report $50. We each get taxed ONCE! Corporate Tax Return Net income before taxes $100 NO “partnership” tax Corporate taxes (40) Net income after Corp. taxes $ 60 Individual’s Tax Returns Individual Tax Returns P1 P2 Diff Dividend income $ 60 Net income before taxes $ 50 $ 50 (20) Individual taxes (12) Individual taxes (20) Net income after Indiv. taxes $ 48 Net income after Indiv. taxes $ 30 $ 30 $12
Capital Distributions $50 Single Taxation Are NOT taxed Capital Distributions $50 Assets = Liabilities + Equity
High Access to Expertise We’re all partners. We can all make decisions.
High Access to Expertise
High Access to Expertise I’m the managing partner. I’m the sales partner. I’m the client service partner. I have a blister. I vote that we go home.
Limited Access to Capital Lucky my 5,000 partners have some extra capital. $$$$$$ $$$$$$ Partnership
Unlimited Legal Liability Now that’s better. Oooops! He blew it. You owe me!!! Lawsuit against ALL your assets and your partners’.
Potentially Unlimited Life That’s OK, we’ll just get a new partner. I’m leaving. I’m terminating our partnership. Partnership ends when
Difficult Transfer of Ownership CAN with vote Join partnership. CAN Take over partnership’s assets and liabilities. CAN’T Take our partnership.
Introduction to Accounting Preparing for a User’s Perspective What are the common forms of business ownership structure in the United States and what are some advantages and disadvantages of each? Debits and Credits Trainer Partnerships By Kevin C. Kimball, CPA with support from www.canvas.net Free Jan. 2014 Available on the Google Play Store