5 Business Organizations Free Online FlashCards

How is a sole proprietorship generally formed?

A sole proprietorship generally exists when one individual conducts business without forming another entity.

Can a general partnership arise without formation filings?

A general partnership can arise when two or more people carry on a business as co-owners, even without filing formation papers.

What filing commonly forms a corporation?

A corporation is formed under state law by filing articles of incorporation.

What filing generally forms an LLC?

An LLC is generally formed under state law by filing articles of organization.

Name two ways an owner may face personal liability despite limited liability.

Limited liability does not shield an owner from responsibility for their own wrongful conduct or a personal guarantee they signed.

What is the default federal income-tax treatment of a domestic single-member LLC?

A domestic single-member LLC is generally treated by default as disregarded from its owner for federal income-tax purposes.

What is the typical liability rule for a sole proprietor?

The owner and business are not legally separate for liability, so the owner may be personally responsible for business debts and obligations.

Who commonly has management rights in a general partnership?

Partners commonly share management rights by default, subject to their agreement and state law.

What is the typical liability rule for general partners?

Partners generally face personal liability for partnership obligations, including certain obligations arising from another partner’s conduct in the business.

How is corporate governance generally divided?

Shareholders generally elect a board of directors; the board oversees the corporation, while officers handle day-to-day operations.

What liability protection do corporate shareholders generally have?

The corporation is a separate legal entity, and shareholders generally risk their investment rather than personal assets for corporate debts, subject to exceptions.

What are LLC owners called?

LLC owners are called members.