1. Business Structures

2. Our Learning Objective:
A3.1: Explain the organizational structure of various business environments.
A1.4: Determine the type of business organization most appropriate for various business environments.

3. How to Start a Business in CA…
Register a DBA (Doing Business As…) or FBN (Fictitious Business Name) with the CA Secretary of State.
Select your business structure.
File with the government to get a federal employer identification number.
Get business license and permits from the County Clerk.

4. 3 Forms of Ownership Sole Proprietorships Partnerships Corporations
General Partnership
Limited Partnership
Limited Liability Partnership (LLP)
Corporations
C Corporation
S Corporation
Limited Liability Company (LLC)

6. Sole Proprietorship Simple Low taxation
One owner
Taxed based on income received (Single-taxation)
Pros:
Simple
Low taxation
Owner can make all business decisions instead of a board of directors
Cons: Unlimited liability (if sued, money comes out of the business…and the owner’s pocket.)
Store story

7. Pass-through Taxation
Income Statement
Revenue: $108,000
Expenses: $90,000
Net Income: $18,000
The net income passes through the
business’s income statement and into…
…The business owner’s wallet…
The business owner then fills out a 1040 Schedule C tax form to show the IRS his/her profit

8. Partnership Two or more owners.
Taxes based on income (Single-taxation)
Two types: General and Limited

12. Corporation Owned by shareholders.
Shareholders gain ownership by buying “shares” of stock
Example: owning 100,000 shares of a company that issues 1 million shares means you own 10% of that company.

13. Pass out Shares

14. Stocks and Dividends
Dividends: a distribution of a portion of a company's earnings.
In plain English: a “thank you” payment for buying and holding their stock.

15. Pass out dividends

16. Double Taxation
The corporations profits are taxed… (39.1% for highest profitability) …And… Dividends are also taxed (15% for high-income earners) and (25% for very high-income earners). Corporate executives own large amounts of stock so they are heavily taxed. Shares of stock are given to them as part of a compensation package.

19. Check for Understanding (Questions)
1. What is a sole proprietorship?
2. Name one advantage of a partnership and one disadvantage of a partnership.
3. Role-play limited vs. unlimited liability when a business lawsuit takes place.
4. What structure is most appropriate for a person who prefers control of the business and is more worried about taxes than lawsuits? Why?

20. 3 Forms of Ownership Sole Proprietorships Partnerships Corporations
General Partnership
Limited Partnership
Limited Liability Partnership (LLP)
Corporations
C Corporation
S Corporation
Limited Liability Company (LLC)

21. Research and Presentations
30 minutes

25. LLC vs LLP
Combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation.
Pro: limited liability
Con: $800 tax + additional tax if income is higher than $250,000
Partnership in which some or all partners have limited liabilities.
Pro: one partner is not responsible or liable for another partner's misconduct or negligence.
Con: Additional taxes (similar to LLC)