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Chapter 1

Chapter 1. Supplements. Types of Business Entities. Profit-making enterprises Sole proprietorship: Partnership: Corporation:. Sole Proprietorship. UNINCORPORATED business owned by one person. Owner is manager Accounting: viewed as a separate entity Taxes: not separate from owner.

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Chapter 1

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  1. Chapter 1 Supplements

  2. Types of Business Entities • Profit-making enterprises • Sole proprietorship: • Partnership: • Corporation:

  3. Sole Proprietorship • UNINCORPORATED business owned by one person. • Owner is manager • Accounting: viewed as a separate entity • Taxes: not separate from owner

  4. Partnership • UNINCORPORATED business owned by TWO or more persons knows as PARTNERS. • Usually created by partnership agreement (how to divide income and how to distribute net assets upon dissolution). • Legally, each partner in a general partnership is responsible for the debts of the partnership. • Accounting: Considered a separate entity • Taxes: More complex, but flows to partners tax returns. • Other types of partnerships: Limited partnerships

  5. Corporations • Incorporated under state regulations and laws. • Owners are called SHAREHOLDERS or STOCKHOLDERS. • Owners own shares of stock in the company • ACCOUNTING: Separate entity • Taxes: Separate entity -- corporate tax • Board of Directors -- Oversight

  6. Corporations • Dominant form of business in the US (by size) • Advantages of Corporate form: • Limited liability of owners • Continuity of life • Ease of transferring ownership (sale of stock) • Opportunity to raise large amounts of capital (cash) from large numbers of people. • Disadvantages of Corporate form: • Double taxation

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