Copyright 2010 by South-Western/Cengage Learning Chapter 13 Forms of Doing Business
Copyright 2010 by South-Western/Cengage Learning 13-1 Comparison of Business Organizations FormFormationFundingManagement Sole proprietorship Partnership Limited partnership Corporation S corporation or Subchapter S Limited liability company (LLC) Limited liability partnership No formal requirements Articles of partnership Filing of articles of partnership Formal filing of articles of incorporation Same as above (special IRS filings) Formal filing – articles of organization Filing of articles of limited liability partnership Individual provides funds Capital contributions of partners Capital contributions of general and limited partners Debt (bonds)/equity (shareholders) Same as above Capital contributions of members Capital contributions of partners Individual All partners or delegated to one General partner Board of directors, officers and/or executive committee Same as above No centralized management; all members manage or delegate to one member All partners or delegated to one
Copyright 2010 by South-Western/Cengage Learning 13-2 Comparison of Business Organizations FormTransfer ControlTaxes Sole proprietorship Partnership Limited partnership Corporation S corporation or Subchapter S Limited liability company (LLC) Limited liability partnership No transfer Transfer interest but not partner status Same as partnership (except RULPA) Shares (with reasonable restrictions) are easily transferred Restrictions on transfer to comply with S corporation No transfer without consent of the majority No admission without consent of majority Individual pays on individual return Partner takes profits and losses on individual return (flow- through) Same as partnership Corporation pays taxes; shareholders pay taxes on dividends Shareholders pay taxes on profits; take losses Flow-through treatment
Copyright 2010 by South-Western/Cengage Learning 13-3 Comparison of Business Organizations FormTerminationLiability Sole proprietorship Partnership Limited partnership Corporation S corporation or Subchapter S Limited liability company (LLC) Limited liability partnership Death; voluntary Dissolution upon death; withdrawal of partner Same as partnership Dissolved only if limited in duration or shareholders vote to dissolve Same as above Dissolved upon death; bankruptcy Dissolved upon death, bankruptcy Individual Partners are personally liable General partner is personally liable; limited partners liable to extent of contribution No shareholder personal liability unless (1) Watered or (2) Corporate veil Same as above Limited liability – only liable to extent of capital contribution Varies by state, but liability for acts of partners is limited in some way