Business Entities Flashcards

Sole Proprietorship

A business owned and operated by a single individual who is responsible for all debts and obligations.

Unlimited Personal Liability

The owner is fully responsible for all business debts and obligations, risking personal assets.

General Partnership

A business arrangement where two or more individuals share ownership and profits, with each partner having joint liability.

Flow Through Taxation

The type of taxation where the business itself is not taxed, but profits and losses are reported on the owners' personal tax returns.

Jointly and Severally Liable

In a partnership, each partner can be held liable for the full amount of the debts, allowing creditors to pursue any partner for the entire debt amount.

Special Allocations

An allocation of profits and losses in a partnership that does not follow the standard ownership percentage, often used in accordance with partner agreements.

Compensation for Partnership Work

Payments made to partners based on profits, which may not involve standard employment benefits such as withheld taxes.

Pass Through Entities

Business structures, like LLCs and partnerships, where income passes directly to the owners for tax purposes without being taxed at the entity level.

Informational Tax Return

A tax return filed by a partnership to report income, deductions, and profits, without actual tax being assessed at the partnership level.

Royalty Agreement

A contractual arrangement where one party pays another for the use of their property, such as trademarks or business methods.