Forms of Companies
Forms of Companies mgt 319
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This 3 page Class Notes was uploaded by firstname.lastname@example.org Notetaker on Tuesday October 6, 2015. The Class Notes belongs to mgt 319 at Pace University taught by Esposito in Fall 2015. Since its upload, it has received 21 views. For similar materials see International Entrepreneurship in Business, management at Pace University.
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Date Created: 10/06/15
How many forms of a company are there 0 Sole proprietorship Partnership 0 CCorporation SCorporation o LLC Sole proprietorship has a single owner and only requires local business licenses to open 0 Pros 0 Simple to create 0 Low startup fees 0 No special legal restrictions 0 Unlimited personal liabilityie if the company is sued you re sued 0 Limited access to capital because its just you less funds for supporting the business 0 Lack of continuity for business Partnership usually defined as an association of two or more people carrying on as coowners of a business for profit 0 Pro 0 Easy to establish 0 Division of profits 0 Ability to attract partners 0 Little government regulations Con 0 Unlimited liability of at least one partner 0 Capital accumulation not possible 0 Restrictions of eliminating general partner 0 Potential for personality and authority conflict CCorporation 0 Overview 0 Separate legal and tax entity from owners 0 Shareholder liability limited to invested capital 0 Existence continues after shareholder s death 0 Best form for raising external capital 0 Taxed twice 0 Pro Limited liability 0 Most appropriate structure for an IPO 0 Certain tax benefits and easy to provide stock option plans 0 Ease of transferability of interests 0 Structure that a venture capitalist requires 0 Con O O 0 Double taxation at the personal and corporate level once profitable High administration compliance costs Directors are held personally accountable Well defined corporate governance rules and laws to follow SCorp Small Business Corporationquot 0 Overview 0 O O A corporation but with flow throughquot tax benefits to owners As a corporation SubS is a separate entity and therefore has limited liability for owners and stockholders Limited to 100 owners only one class of stock allowed and no foreign shareholders Taxed once Liability protection Enjoy corporation status but owners pay the taxes Stringent rules necessary to maintain SubS status Qualification requirements bring administrative and cost burdens Failure to comply with SubS rules may have major tax consequences Not eligible for qualified employee stock options Investors cannot receive preferred shares as in a C Corp LLC Limited Liability Companyquot 0 Overview 0 O 0 Pro Owner by members not shareholders A combination of the best characteristics of corporations partnerships and sole proprietorships Liability protection separate legal entity as in a C corporation LLC is not a tax paying entity tax benefits to members State meeting and minutes are not required Unlimited that a venture capitalist would invest Cannot take the company public Different shareholder interests result in complex operating agreements o All members must consent to transfer ownership 0 Some states have different management and member rules 0 Often used initially before converting to a C Corporation which incurs costs Possible legal agreements required Subscription agreements used for initial and subsequent capital contributions Purchase amp sale agreements used for purchase of operating assets Employment agreements given to senior executives Confidentiality agreements used to protect existing and in process intellectual property for employees and third parties License agreements covers any intellectual property that you use or license Customer agreements basis for delivery of services service companies only
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