HR homework - Due 7/30

Ownership Structures

Sole Proprietor

General Partnership

Limited Liability Company (LLC)

Corporation

Number of Owners

One

Two or more

One or more

Multiple

Formation Difficulty

Low

Low

Medium

High

Liability

Sole proprietor has unlimited liability.

Unlimited, Limited Liability

Limited Liability

Officers/shareholders are not typically responsible for the debts of the corporation.

Operational Requirements

Few to no legal requirements. Varies by locale and laws

There are relatively few legal requirements.

Can be complicated, Lawyer recommended, Varies by State.

Formal board of directors, annual meetings, and annual reporting required.

Management

Sole proprietor has full control of management and operations.

General, Limited, and Limited Liability.

Members have an operating agreement that outlines management.

Officers/shareholders, Board of Directors.

Federal Taxation

Not a taxable entity, reports income and losses on personal tax returns

It is not a taxable entity. Each partner pays tax on his/her share of income and can deduct losses against other sources of income.

Not a taxable entity. Profits “pass through” businesses to their owners and reports income and losses on personal tax returns.

It is taxed at the entity level. If dividends are distributed to shareholders, they are also taxed at the individual level.