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Survey of Entrepreneurship Class 13 Introduction to U.S. Legal Business Forms King Saud University -- Kent State University Partners in Entrepreneurship
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13_Objective Introduce legal forms of U.S. business entities.
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13_Interactivities Students will complete an exercise in choosing the proper legal structure.
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Basic Ownership Structures Sole proprietorship Partnership – General – Limited – Limited liability partnership Corporation – C-Corp – S-Corp Limited liability company
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Sole Proprietorship Pros – Easy, inexpensive – Full control – Minimal legal require- ments, compliance is easy – Profits taxed on personal basis Cons – Personal liability – No easily available long- term financing – No one to share the burden with – Illness/death of the proprietor dissolves the business
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Partnerships Pros – Easy to establish – Limited paperwork – Shared responsibilities – Easier to obtain financing – Profits taxed on personal basis Cons – Unlimited personal liability – Bounded by actions of other partners – Divided authority – Loss of a partner will dissolve the business
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Partnerships (cont’d) Limited partnerships: – Personal protection for limited partners Limited liability partnerships: – Less regulation on the ownership, capital structure, and division of profits – Newer legal form, few precedents
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General (C) Corporation Pros – Lifespan independent of founders/owners – Tax-deductible benefits – Protection of personal assets – Easy transferability of interest – Easy to raise capital Cons – Considerable start-up expenses – Complicated cost of compliance – Dual taxation (profits and dividends)
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S Corp Pros – Profits taxed on personal basis Cons – Same as C-Corporation – Cannot own stock if you are nonresident alien – Complicated maintenance of status
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Limited Liability Company Pros – Profits taxed on personal basis – Personal assets protected – Simpler to operate than a corporation – Fewer formalities Cons – Different rules apply in different states – Newer legal form, few precedents
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13_Handout 13_Legal_Form_Exercises
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13_Homework Fill in questions 48 and 49 of your business plan.
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13 Questions
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