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Law Outlines Law and Business Planning Outlines

Law And Business Entity Chart Breakdown Outline

Updated Law And Business Entity Chart Breakdown Notes

Law and Business Planning Outlines

Law and Business Planning

Approximately 56 pages

I handwrote my notes for this entire class and then used the notes to create this outline for the Final Exam. ...

The following is a more accessible plain text extract of the PDF sample above, taken from our Law and Business Planning Outlines. Due to the challenges of extracting text from PDFs, it will have odd formatting:

S Corp C Corp SP GP LLC LP LLP

Formation

Certificate of Incorporation Certificate of Incorporation Default – no filing Default – no filing Must file under state LLC Act Must file w/Secretary of State Must file a certificate w/OK Secretary of State

Mgmt

Board of Directors manages business, not S/Hs Board of Directors manages business, not S/Hs Only 1 owner who directly manages everything Partners have = rights to manage the business, unless they agree otherwise

Member-Managed: Mgmt is shared among the owners

Mgr.-Managed: day-to-day operations conducted by “mgrs.”

Limited Partners don’t have mgmt rights – mgmt is in hands of General Partners Partners have = rights to manage the business, unless they agree otherwise

Personal Liability

Ltd Liability: S/Hs, board members, & officers not personally liable for business debts of business – paid out of corp assets

S/Hs – Veil Piercing

Ltd Liability: S/Hs, board members, & officers not personally liable for business debts of business – paid out of corp assets

S/Hs – Veil Piercing

Debts paid from the personal assets of the owner.

Individuals are always liable for their personal wrongdoing & for Ks they guarantee

Partners personally liable for the debts of the business—arguably more risky than SP bc also liable for acts of other partners & bc are fragile Liability of owners (“members”) is limited – not liable for debts of the business

Ltd. Partners are exempt fr liability for debts of firm

General Partners are not exempt from liability for debts of firm

Both have ltd. liability for tortious acts of other partners

(1) Full Shield States: offer protection fr liability for debts of the business & acts of others

(2) Partial Shield States: ltd. liability which shields partners fr vicarious liability for the acts of others, but not debts of business

Taxes

Flow-thru Taxation Double Taxation Net income fr business is TI to the SP Flow-Through Flow-Through, UNLESS an election is made to be treated as a corporation Flow-Through Flow-Through

Exiting

Sale of Shares Sale of Shares Easy – only 1 person

Can exit whenever (subject to K), but cashing out can be difficult if nobody interested in buying

Usually contractual buyout arrangements w/fellow partners

Doesn’t have to cause a dissolution of the LLC

More confined

Under many statutes, LPs are entitled to a return of their capital after some period after giving notice of withdrawal, unless p’ship agreement specifies otherwise

Same as GP – can exit at any time, but may be difficult cashing out – usually contractual buying arrangements w/fellow partners

Self-Employment Taxes

S/H in S Corp only pays SE taxes on the portion of the income that’s attributable to services & any amt in excess of that is considered a return on your investment & is not subject to SE tax Taking out salary in C Corps is subject to self-employment taxes, so would want to pay out dividends instead A partner’s distributive share of income fr. a p’ship constitutes earnings fr self-employment

A partner’s distributive share of income fr. a p’ship constitutes earnings fr self-employment

Want to fit into limited p’ship exception

GR: Not going to be treated like a limited partner & will have to pay SE taxes

Subj. to SE taxes on the income IF 1 of 3 things:

(1) have personal liability for the debts of LLC

(2) have authority to K OBO LLC, or

(3) participate in the bus of the LLC >500 hrs during taxable yrs

LPs are generally not subj. to SE taxes

GP under state law is exposed to SE taxes

Sale of Assets

Gains realized on sale of the assets are taxed to the owners in proportion to their interests in the business, & after those taxes are pd the owners pocket the net proceeds Worst option b/c of dbl tax, but is mitigated Gains realized on sale of the assets are taxed to the owners in proportion to their interests in the business, & after those taxes are pd the owners pocket the net proceeds Gains realized on sale of the assets are taxed to the owners in proportion to their interests in the business, & after those taxes are pd the owners pocket the net proceeds Gains realized on sale of the assets are taxed to the owners in proportion to their interests in the business, & after those taxes are pd the owners pocket the net proceeds Gains realized on sale of the assets are taxed to the owners in proportion to their interests in the business, & after those taxes are pd the owners pocket the net proceeds Gains realized on sale of the assets are taxed to the owners in proportion to their interests in the business, & after those taxes are pd the owners pocket the net proceeds

Accumulated Earnings

DO increase basis Do not increase basis (taxable gain can be huge then) DO increase basis DO increase basis DO increase basis DO increase basis DO increase basis

Diff. Ownership Interests

Very little flexibility—can only have 1 class of...

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