FINC 331-WEEK 1:Organizational Forms of Business

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Choose Your Business Structure comprises public domain material from The U.S. Small Business Administration. UMGC has modified this work.

Choose Your Business Structure

Sole Proprietorship

A sole proprietorship is the simplest and most common structure chosen to start a business. It is an

unincorporated business owned and run by one individual with no distinction between the business and

you, the owner. You are entitled to all profits and are responsible for all your business’s debts, losses

and liabilities.

Forming a Sole Proprietorship

You do not have to take any formal action to form a sole proprietorship. As long as you are the only

owner, this status automatically comes from your business activities. In fact, you may already own one

without knowing it. If you are a freelance writer, for example, you are a sole proprietor.

But like all businesses, you need to obtain the necessary licenses and permits. Regulations vary by

industry, state and locality. Use the Licensing & Permits tool to find a listing of federal, state and local

permits, licenses and registrations you'll need to run a business.

If you choose to operate under a name different than your own, you will most likely have to file

a fictitious name (also known as an assumed name, trade name, or DBA name, short for "doing business

as"). You must choose an original name; it cannot already be claimed by another business.

Sole Proprietor Taxes

Because you and your business are one and the same, the business itself is not taxed separately-the sole

proprietorship income is your income. You report income and/or losses and expenses with a Schedule C

and the standard Form 1040. The “bottom-line amount” from Schedule C transfers to your personal tax

return. It’s your responsibility to withhold and pay all income taxes, including self-employment and

estimated taxes. You can find more information about sole proprietorship taxes and other forms at

IRS.gov.

Advantages of a Sole Proprietorship • Easy and inexpensive to form: A sole proprietorship is the simplest and least expensive business

structure to establish. Costs are minimal, with legal costs limited to obtaining the necessary

license or permits.

• Complete control. Because you are the sole owner of the business, you have complete control

over all decisions. You aren’t required to consult with anyone else when you need to make

decisions or want to make changes.

• Easy tax preparation. Your business is not taxed separately, so it’s easy to fulfill the tax

reporting requirements for a sole proprietorship. The tax rates are also the lowest of the

business structures.

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Disadvantages of a Proprietorship

• Unlimited personal liability. Because there is no legal separation between you and your

business, you can be held personally liable for the debts and obligations of the business. This risk

extends to any liabilities incurred as a result of employee actions.

• Hard to raise money. Sole proprietors often face challenges when trying to raise money.

Because you can’t sell stock in the business, investors won't often invest. Banks are also hesitant

to lend to a sole proprietorship because of a perceived lack of credibility when it comes to

repayment if the business fails.

• Heavy burden. The flipside of complete control is the burden and pressure it can impose. You

alone are ultimately responsible for the successes and failures of your business.

Limited Liability Company

A limited liability company is a hybrid type of legal structure that provides the limited liability features of

a corporation and the tax efficiencies and operational flexibility of a partnership.

The "owners" of an LLC are referred to as "members." Depending on the state, the members can consist

of a single individual (one owner), two or more individuals, corporations or other LLCs.

Unlike shareholders in a corporation, LLCs are not taxed as a separate business entity. Instead, all profits

and losses are "passed through" the business to each member of the LLC. LLC members report profits

and losses on their personal federal tax returns, just like the owners of a partnership would.

Forming an LLC

While each state has slight variations to forming an LLC, they all adhere to some general principles:

Choose a Business Name. There are 3 rules that your LLC name needs to follow: (1) it must be different

from an existing LLC in your state, (2) it must indicate that it's an LLC (such as "LLC" or Limited

Company") and (3) it must not include words restricted by your state (such as "bank" and "insurance").

Your business name is automatically registered with your state when you register your business, so you

do not have to go through a separate process. Read more here about choosing a business name.

File the Articles of Organization. The "articles of organization" is a simple document that legitimizes

your LLC and includes information like your business name, address, and the names of its members. For

most states, you file with the Secretary of State. However, other states may require that you file with a

different office such as the State Corporation Commission, Department of Commerce and Consumer

Affairs, Department of Consumer and Regulatory Affairs, or the Division of Corporations & Commercial

Code. Note: there may be an associated filing fee.

Create an Operating Agreement.Most states do not require operating agreements. However, an

operating agreement is highly recommended for multi-member LLCs because it structures your LLC's

finances and organization, and provides rules and regulations for smooth operation. The operating

agreement usually includes percentage of interests, allocation of profits and losses, member's rights and

responsibilities and other provisions.

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Obtain Licenses and Permits. Once your business is registered, you must obtain business licenses and

permits. Regulations vary by industry, state and locality. Use the Licensing & Permits tool to find a listing

of federal, state and local permits, licenses and registrations you'll need to run a business.

Hiring Employees. If you are hiring employees, read more about federal and state regulations for

employers.

Announce Your Business. Some states, including Arizona and New York, require the extra step of

publishing a statement in your local newspaper about your LLC formation. Check with your state's

business filing office for requirements in your area.

LLC Taxes

In the eyes of the federal government, an LLC is not a separate tax entity, so the business itself is not

taxed. Instead, all federal income taxes are passed on to the LLC's members and are paid through their

personal income tax. While the federal government does not tax income on an LLC, some states do, so

check with your state's income tax agency.

Since the federal government does not recognize LLC as a business entity for taxation purposes, all LLCs

must file as a corporation, partnership, or sole proprietorship tax return. Certain LLCs are automatically

classified and taxed as a corporation by federal tax law. For guidelines about how to classify an LLC,

visit IRS.gov.

LLCs that are not automatically classified as a corporation can choose their business entity classification.

To elect a classification, an LLC must file Form 8832. This form is also used if an LLC wishes to change its

classification status. Read more about filing as a corporation or partnership and filing as a single

member LLC at IRS.gov.

You should file the following tax forms depending on your classification:

• Single Member LLC. A single-member LLC files Form 1040 Schedule C like a sole proprietor.

• Partners in an LLC. Partners in an LLC file a Form 1065 partnership tax return like owners in a

traditional partnership.

• LLC filing as a Corporation. An LLC designated as a corporation files Form 1120, the corporation

income tax return.

The IRS guide to Limited Liability Companies provides all relevant tax forms and additional information

regarding their purpose and use.

Combining the Benefits of an LLC with an S-Corp

There is always the possibility of requesting S-Corp status for your LLC. An attorney can advise you on

the pros and cons. You'll have to make a special election with the IRS to have the LLC taxed as an S-Corp

using Form 2553. You must file prior to the first two months and fifteen days of the beginning of the tax

year in which the election is to take effect. For more information about S-Corp status, visit IRS.gov or

read Should My Company be an LLC, an S-Corp or Both?

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The LLC remains a limited liability company from a legal standpoint, but for tax purposes it can be

treated as an S-Corp. Be sure to contact the state's income tax agency where you plan to file your

election form. Ask about the tax requirements and if they recognize elections of other entities (such as

the S-Corp).

Advantages of an LLC

• Limited Liability.Members are protected from personal liability for business decisions or actions

of the LLC. This means that if the LLC incurs debt or is sued, members' personal assets are

usually exempt. This is similar to the liability protections afforded to shareholders of a

corporation. Keep in mind that limited liability means "limited" liability - members are not

necessarily shielded from wrongful acts, including those of their employees.

• Less Recordkeeping. An LLC's operational ease is one of its greatest advantages. Compared to

an S-Corporation, there is less registration paperwork and there are smaller start-up costs.

• Sharing of Profits. There are fewer restrictions on profit sharing within an LLC, as members

distribute profits as they see fit. Members might contribute different proportions of capital and

sweat equity. Consequently, it's up to the members themselves to decide who has earned what

percentage of the profits or losses.

Disadvantages of an LLC

• Limited Life. In many states, when a member leaves an LLC, the business is dissolved and the

members must fulfill all remaining legal and business obligations to close the business. The

remaining members can decide if they want to start a new LLC or part ways. However, you can

include provisions in your operating agreement to prolong the life of the LLC if a member

decides to leave the business.

• Self-Employment Taxes.Members of an LLC are considered self-employed and must pay the

self-employment tax contributions towards Medicare and Social Security. The entire net income

of the LLC is subject to this tax.

Cooperative

A cooperative is a business or organization owned by and operated for the benefit of those using its

services. Profits and earnings generated by the cooperative are distributed among the members, also

known as user-owners.

Typically, an elected board of directors and officers run the cooperative while regular members have

voting power to control the direction of the cooperative. Members can become part of the cooperative

by purchasing shares, though the amount of shares they hold does not affect the weight of their vote.

Cooperatives are common in the healthcare, retail, agriculture, art and restaurant industries.

Forming a Cooperative

Forming a cooperative is different from forming any other business entity. To start up, a group of

potential members must agree on a common need and a strategy on how to meet that need. An

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organizing committee then conducts exploratory meetings, surveys, and cost and feasibility analyses

before every member agrees with the business plan. Not all cooperatives are incorporated, though

many choose to do so. If you decide to incorporate your cooperative, you must complete the following

steps:

• File Articles of Incorporation. The articles of incorporation legitimizes your cooperative and

includes information like the name of the cooperative, business location, purpose, duration of

existence, and names of the incorporators, and capital structure. Once the charter members

(also known as the incorporators) file with your state business entity registration office and the

articles are approved, you should create bylaws for your cooperative.

• Create Bylaws.While the law does not require bylaws, they do need to comply with state law

and are essential to the success of your cooperative. Bylaws list membership requirements,

duties, responsibilities and other operational procedures that allow your cooperative to run

smoothly. According to most state laws, the majority of your members must adopt articles of

incorporation and bylaws. Consult an attorney to verify that your bylaws comply with state laws.

• Create a Membership Application. To recruit members and legally verify that they are part of

the cooperative, you must create and issue a membership application. Membership applications

include names, signatures from the board of directors and member rights and benefits.

• Conduct a Charter Member Meeting and Elect Directors. During this meeting, charter members

discuss and amend the proposed bylaws. By the end of the meeting, all of the charter members

should vote to adopt the bylaws. If the board of directors were not named in the articles of

incorporation, you must designate them during the charter meeting.

• Obtain Licenses and Permits. You must obtain relevant business licenses and permits.

Regulations vary by industry, state and locality. Use our Licensing & Permits tool to find a list of

federal, state and local permits, licenses and registrations you'll need to run a business.

• Hiring Employees. If you are hiring employees, read more about federal and state regulations

for employers.

Each state will have slightly different laws that govern a cooperative. Consult an attorney, your Secretary

of State or State Corporation Commissioner for more information regarding your state's specific laws.

Cooperative Taxes

Most businesses need to register with the IRS, register with state and local revenue agencies, and obtain

a tax ID number or permit. A cooperative operates as a corporation and receives a "pass-through"

designation from the IRS. More specifically, cooperatives do not pay federal income taxes as a business

entity.

Instead, the cooperative's members pay federal taxes when they file their personal income tax.

Members pay federal and state income tax on the margins earned by the cooperative, though the

amount of taxation varies slightly by state. Cooperatives must follow the rules and regulations of

the IRS's Subchapter T Cooperatives tax code to receive this type of tax treatment.

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To file taxes on income received from cooperatives, please refer to IRS instructions on how to file Form

1099-PATR. If you create a consumer cooperative for retail sales of goods or services that are generally

for personal, living, or family, you will need to file Form 3491 Consumer Cooperative Exemption

Application for exemption from Form 1099-PATR.

Some cooperatives, like credit unions and rural utility cooperatives, are exempt from federal and state

taxes due to the nature of their operations. Check with your state's income tax agency for information

about state taxes.

Advantages of a Cooperative

• Less Taxation. Similar to an LLC, cooperatives that are incorporated normally are not taxed on

surplus earnings (or patronage dividends) refunded to members. Therefore, members of a

cooperative are only taxed once on their income from the cooperative and not on both the

individual and the cooperative level.

• Funding Opportunities. Depending on the type of cooperative you own or participate in, there

are a variety of government-sponsored grant programs to help you start. For example, the USDA

Rural Development program offers grants to those establishing and operating new and existing

rural development cooperatives.

• Reduce Costs and Improve Products and Services. By leveraging their size, cooperatives can

more easily obtain discounts on supplies and other materials and services. Suppliers are more

likely to give better products and services because they are working with a customer of more

substantial size. Consequently, the members of the cooperative can focus on improving

products and services.

• Perpetual Existence. A cooperative structure brings less disruption and more continuity to the

business. Unlike other business structures, members in a cooperative can routinely join or leave

the business without causing dissolution.

• Democratic Organization. Democracy is a defining element of cooperatives. The democratic

structure of a cooperative ensures that it serves its members' needs. The amount of a member's

monetary investment in the cooperative does not affect the weight of each vote, so no member-

owner can dominate the decision-making process. The "one member-one vote" philosophy

particularly appeals to smaller investors because they have as much say in the organization as

does a larger investor.

Disadvantages of a Cooperative

• Obtaining Capital through Investors. Cooperatives may suffer from slower cash flow since a

member's incentive to contribute depends on how much they use the cooperative's services and

products. While the "one member-one vote" philosophy is appealing to small investors, larger

investors may choose to invest their money elsewhere because a larger share investment in the

cooperative does not translate to greater decision-making power.

• Lack of Membership and Participation. If members do not fully participate and perform their

duties, whether it be voting or carrying out daily operations, then the business cannot operate

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at full capacity. If a lack of participation becomes an ongoing issue for a cooperative, it could risk

losing members.

Corporation

Corporation (C Corporation)

A corporation (sometimes referred to as a C corporation) is an independent legal entity owned by

shareholders. This means that the corporation itself, not the shareholders that own it, is held legally

liable for the actions and debts the business incurs.

Corporations are more complex than other business structures because they tend to have costly

administrative fees and complex tax and legal requirements. Because of these issues, corporations are

generally suggested for established, larger companies with multiple employees.

For businesses in that position, corporations offer the ability to sell ownership shares in the business

through stock offerings. “Going public” through an initial public offering (IPO) is a major selling point in

attracting investment capital and high quality employees.

Forming a Corporation

A corporation is formed under the laws of the state in which it is registered. To form a corporation you’ll

need to establish your business name and register your legal name with your state government. If you

choose to operate under a name different than the officially registered name, you’ll most likely have to

file a fictitious name (also known as an assumed name, trade name, or DBA name, short for "doing

business as"). State laws vary, but generally corporations must include a corporate designation

(Corporation, Incorporated, Limited) at the end of the business name.

To register your business as a corporation, you need to file certain documents, typically articles of

incorporation, with your state’s Secretary of State office. Some states require corporations to establish

directors and issue stock certificates to initial shareholders in the registration process. Contact your

state business entity registration office to find out about specific filing requirements in the state where

you form your business.

Once your business is registered, you must obtain business licenses and permits. Regulations vary by

industry, state and locality. Use our Licensing & Permits tool to find a listing of federal, state and local

permits, licenses and registrations you'll need to run a business.

If you are hiring employees, read more about federal and state regulations for employers.

Corporation Taxes

Corporations are required to pay federal, state, and in some cases, local taxes. Most businesses must

register with the IRS and state and local revenue agencies, and receive a tax ID number or permit.

When you form a corporation, you create a separate tax-paying entity. Regular corporations are called

“C corporations” because Subchapter C of Chapter 1 of the Internal Revenue Code is where you find

general tax rules affecting corporations and their shareholders.

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Unlike sole proprietors and partnerships, corporations pay income tax on their profits. In some cases,

corporations are taxed twice - first, when the company makes a profit, and again when dividends are

paid to shareholders on their personal tax returns. Corporations use IRS Form 1120 or 1120-A, U.S.

Corporation Income Tax Return to report revenue to the federal government.

Shareholders who are also employees pay income tax on their wages. The corporation and the

employee each pay one half of the Social Security and Medicare taxes, but this is usually a deductible

business expense.

Read more about tax requirements for Corporations on IRS.gov.

Advantages of a Corporation

• Limited Liability.When it comes to taking responsibility for business debts and actions of a

corporation, shareholders’ personal assets are protected. Shareholders can generally only be

held accountable for their investment in stock of the company.

• Ability to Generate Capital. Corporations have an advantage when it comes to raising capital for

their business - the ability to raise funds through the sale of stock.

• Corporate Tax Treatment. Corporations file taxes separately from their owners. Owners of a

corporation only pay taxes on corporate profits paid to them in the form of salaries, bonuses,

and dividends, while any additional profits are awarded a corporate tax rate, which is usually

lower than a personal income tax rate.

• Attractive to Potential Employees. Corporations are generally able to attract and hire high-

quality and motivated employees because they offer competitive benefits and the potential for

partial ownership through stock options.

Disadvantages of a Corporation

• Time and Money. Corporations are costly and time-consuming ventures to start and operate.

Incorporating requires start-up, operating and tax costs that most other structures do not

require.

• Double Taxing. In some cases, corporations are taxed twice - first, when the company makes a

profit, and again when dividends are paid to shareholders.

• Additional Paperwork. Because corporations are highly regulated by federal, state, and in some

cases local agencies, there are increased paperwork and recordkeeping burdens associated with

this entity.

Partnership

A partnership is a single business where two or more people share ownership.

Each partner contributes to all aspects of the business, including money, property, labor or skill. In

return, each partner shares in the profits and losses of the business.

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Because partnerships entail more than one person in the decision-making process, it’s important to

discuss a wide variety of issues up front and develop a legal partnership agreement. This agreement

should document how future business decisions will be made, including how the partners will divide

profits, resolve disputes, change ownership (bring in new partners or buy out current partners) and how

to dissolve the partnership. Although partnership agreements are not legally required, they are strongly

recommended and it is considered extremely risky to operate without one.

Types of Partnerships

There are three general types of partnership arrangements:

• General Partnerships assume that profits, liability and management duties are divided equally

among partners. If you opt for an unequal distribution, the percentages assigned to each

partner must be documented in the partnership agreement.

• Limited Partnerships (also known as a partnership with limited liability) are more complex than

general partnerships. Limited partnerships allow partners to have limited liability as well as

limited input with management decisions. These limits depend on the extent of each partner’s

investment percentage. Limited partnerships are attractive to investors of short-term projects.

• Joint Ventures act as general partnership, but for only a limited period of time or for a single

project. Partners in a joint venture can be recognized as an ongoing partnership if they continue

the venture, but they must file as such.

Forming a Partnership

To form a partnership, you must register your business with your state, a process generally done

through your Secretary of State’s office.

You’ll also need to establish your business name. For partnerships, your legal name is the name given in

your partnership agreement or the last names of the partners. If you choose to operate under a name

different than the officially registered name, you will most likely have to file a fictitious name (also

known as an assumed name, trade name, or DBA name, short for "doing business as").

Once your business is registered, you must obtain business licenses and permits. Regulations vary by

industry, state and locality. Use our Licensing & Permits tool to find a listing of federal, state and local

permits, licenses and registrations you'll need to run a business.

If you are hiring employees, read more about federal and state regulations for employers.

Partnership Taxes

Most businesses will need to register with the IRS, register with state and local revenue agencies, and

obtain a tax ID number or permit.

A partnership must file an “annual information return” to report the income, deductions, gains and

losses from the business’s operations, but the business itself does not pay income tax. Instead, the

business "passes through" any profits or losses to its partners. Partners include their respective share of

the partnership's income or loss on their personal tax returns.

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Partnership taxes generally include:

• Annual Return of Income

• Employment Taxes

• Excise Taxes

Partners in the partnership are responsible for several additional taxes, including:

• Income Tax

• Self-Employment Tax

• Estimated Tax

Filing information for partnerships:

• Partnerships must furnish copies of their Schedule K-1 (Form 1065) to all partners by the date

Form 1065 is required to be filed, including extensions.

• Partners are not employees and should not be issued a FormW-2.

The IRS guide to Partnerships provides all relevant tax forms and additional information regarding their

purpose and use.

Advantages of a Partnership

• Easy and Inexpensive. Partnerships are generally an inexpensive and easily formed business

structure. The majority of time spent starting a partnership often focuses on developing the

partnership agreement.

• Shared Financial Commitment. In a partnership, each partner is equally invested in the success

of the business. Partnerships have the advantage of pooling resources to obtain capital. This

could be beneficial in terms of securing credit, or by simply doubling your seed money.

• Complementary Skills. A good partnership should reap the benefits of being able to utilize the

strengths, resources and expertise of each partner.

• Partnership Incentives for Employees. Partnerships have an employment advantage over other

entities if they offer employees the opportunity to become a partner. Partnership incentives

often attract highly motivated and qualified employees.

Disadvantages of a Partnership

• Joint and Individual Liability. Similar to sole proprietorships, partnerships retain full, shared

liability among the owners. Partners are not only liable for their own actions, but also for the

business debts and decisions made by other partners. In addition, the personal assets of all

partners can be used to satisfy the partnership’s debt.

• Disagreements Among Partners.With multiple partners, there are bound to be disagreements

Partners should consult each other on all decisions, make compromises, and resolve disputes as

amicably as possible.

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• Shared Profits. Because partnerships are jointly owned, each partner must share the successes

and profits of their business with the other partners. An unequal contribution of time, effort, or

resources can cause discord among partners.

S Corporation

An S corporation (sometimes referred to as an S Corp) is a special type of corporation created through

an IRS tax election. An eligible domestic corporation can avoid double taxation (once to the corporation

and again to the shareholders) by electing to be treated as an S corporation.

An S corp is a corporation with the Subchapter S designation from the IRS. To be considered an S corp,

you must first charter a business as a corporation in the state where it is headquartered. According to

the IRS, S corporations are "considered by law to be a unique entity, separate and apart from those who

own it." This limits the financial liability for which you (the owner, or "shareholder") are responsible.

Nevertheless, liability protection is limited - S corps do not necessarily shield you from all litigation such

as an employee’s tort actions as a result of a workplace incident.

What makes the S corp different from a traditional corporation (C corp) is that profits and losses can

pass through to your personal tax return. Consequently, the business is not taxed itself. Only the

shareholders are taxed. There is an important caveat, however: any shareholder who works for the

company must pay him or herself "reasonable compensation." Basically, the shareholder must be paid

fair market value, or the IRS might reclassify any additional corporate earnings as "wages."

Forming an S Corporation

Before you form an S Corporation, determine if your business will qualify under the IRS stipulations.

To file as an S Corporation, you must first file as a corporation. After you are considered a corporation,

all shareholders must sign and file Form 2553 to elect your corporation to become an S Corporation.

Once your business is registered, you must obtain business licenses and permits. Regulations vary by

industry, state and locality. Use the Licensing & Permits tool to find a listing of federal, state and local

permits, licenses, and registrations you'll need to run a business.

If you are hiring employees, read more about federal and state regulations for employers.

Combining the Benefits of an LLC with an S Corp

There is always the possibility of requesting S Corp status for your LLC. Your attorney can advise you on

the pros and cons. You'll have to make a special election with the IRS to have the LLC taxed as an S corp

using Form 2553. And you must file it before the first two months and fifteen days of the beginning of

the tax year in which the election is to take effect.

The LLC remains a limited liability company from a legal standpoint, but for tax purposes it's treated as

an S corp. Be sure to contact your state's income tax agency where you will file the election form to

learn about tax requirements.

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Taxes

Most businesses need to register with the IRS, register with state and local revenue agencies, and

obtain a tax ID number or permit.

All states do not tax S corps equally. Most recognize them similarly to the federal government and tax

the shareholders accordingly. However, some states (like Massachusetts) tax S corps on profits above a

specified limit. Other states don't recognize the S corp election and treat the business as a C corp with

all of the tax ramifications. Some states (like New York and New Jersey) tax both the S corps profits and

the shareholder's proportional shares of the profits.

Your corporation must file the Form 2553 to elect "S" status within two months and 15 days after the

beginning of the tax year or any time before the tax year for the status to be in effect.

Advantages of an S Corporation

• Tax Savings. One of the best features of the S Corp is the tax savings for you and your business.

While members of an LLC are subject to employment tax on the entire net income of the

business, only the wages of the S Corp shareholder who is an employee are subject to

employment tax. The remaining income is paid to the owner as a "distribution," which is taxed

at a lower rate, if at all.

• Business Expense Tax Credits. Some expenses that shareholder/employees incur can be written

off as business expenses. Nevertheless, if such an employee owns 2% or more shares, then

benefits like health and life insurance are deemed taxable income.

• Independent Life. An S corp designation also allows a business to have an independent life,

separate from its shareholders. If a shareholder leaves the company, or sells his or her shares,

the S corp can continue doing business relatively undisturbed. Maintaining the business as a

distinct corporate entity defines clear lines between the shareholders and the business that

improve the protection of the shareholders.

Disadvantages of an S Corporation

• Stricter Operational Processes. As a separate structure, S corps require scheduled director and

shareholder meetings, minutes from those meetings, adoption and updates to by-laws, stock

transfers and records maintenance.

• Shareholder Compensation Requirements. A shareholder must receive reasonable

compensation. The IRS takes notice of shareholder red flags like low salary/high distribution

combinations, and may reclassify your distributions as wages. You could pay a higher

employment tax because of an audit with these results.