Business Administration & Management

Mr. Bernstein

Corporate Forms of Business Ownership, pp 138-155

March 9, 2015

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Business Administration & Management

Mr. Bernstein

CorporationsBusinesses registered with state government which

operate apart from their ownersSlices of ownership are called shares of stockShareholders are the ownersCorporations must have Board of Directors, who

selects managers to run the company

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Business Administration & Management

Mr. BernsteinCorporations

Shareholders have limited liabilityCorporations have perpetual existence – they do not dieCorporations can deduct contributions to health and retirement

fundsCorporations are more costly to set upThe corporation is taxed and the owners are also taxed on any

dividends or capital gains: “Double Taxation”Corporate tax rate may be different from individual ratesWhat is tax rate for NJ corporation? For an individual entrepreneur

earning $50,000/year in profits? What is the Federal tax for each?

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Business Administration & Management

Mr. Bernstein

Other Types of CorporationsSubchapter S Corporations - taxed like partnerships –

no double taxation, with taxes at owner’s personal rate

Nonprofit Corporation – cannot distribute profitsExamples of Nonprofits?

Limited Liability Companies (LLCs) – Offers limited liability without double taxation as profits are passed through to the individual owners

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Business Administration & Management

Mr. Bernstein

What form of ownership would you use? Consider:Do you have all the skills needed to run this venture?Do you have the capital needed to start the business, or can you obtain it?Will you be able to run the business and cover living expenses for the first year?Are you willing and able to assume personal liability for claims against the business?Do you want complete control over the business?Do you expect to have initial losses, or will the business be profitable from the beginning?Do you expect to sell the business some day?ncie

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Business Administration & Management

Mr. Bernstein

General vs. Limited PartnersGeneral Partners have unlimited liability and full

responsibility for running the businessAny General Partner can enter fully binding contracts on

behalf of the partnershipAll Partnerships must have at least one general partnerLimited Partners have a defined liability (ie in $$$) and

do not participate in business decisions (“silent partner”)