Business Entities: Flashcards

Flashcards of vocabulary terms and definitions from a business entities lecture.

Drivers Behind Entity Choice

Key motivators influencing the choice of business entity.

Limited Liability Partnership (LLP)

A type of partnership often used by accounting firms and other professions, offering limited liability.

Corporation

One of the major types of entities. A separate legal person.

S Corporation

A variation of a corporation, taxed under subchapter S of the Internal Revenue Code.

Limited Liability Company (LLC)

The entity of choice today, widely used.

Benefit Corporation

A type of entity that can be classified as either a C or an S corporation for tax purposes.

Sole Proprietorship

Operating a business without registering a name different from your own.

Fictitious Name

Operating a business under a name different from your own, requiring registration.

Articles of Incorporation

Document filed with the Department of State when forming a corporation.

Articles of Formation

Document filed with the Department of State when forming an LLC.

Corporate Bylaws

Document that outlines the rules and regulations for managing a corporation.

Limited Partnership (LP)

A special type of partnership created by filing a certificate with the secretary of state.

Statement of Registration

Document required to register a domestic registered limited liability partnership.

Form 2553

A federal election form filed by S corporations.

Member Operating Agreement (MLA)

A required operating agreement for limited liability companies.

Limits to Liability

The potential for a business to be held responsible for financial loss/ damage.

Sole Proprietorship Taxation

Tax paid at the individual level, including both income tax and self-employment tax.

Withdrawals

Payments to the owner(s) of a sole proprietorship, generally nontaxable.

Joint and Several Liability

Liability where each partner is 100% liable for any claim from the partnership.

Guaranteed Payment

Payments to partners for their work, often the first distribution of profits.

Opportunity Zone

An investment in opportunities owned businesses or assets to defer capital gains tax.

LLP Liability

Limits liability for malpractice to the person who committed the act.

Agency Relationship

The legal concept describing the relationship between shareholders and the board of directors, and between the corporation and its officers.

Dividends

Compensation to owners of a corporation, subject to taxation.

Section 1(h) Rates

Tax rate applicable to qualified dividends.