Sole proprietorships, partnerships, corporations, and LLCs, including formation and owner liability differences.
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- What is a sole proprietorship?
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A business owned and operated by one person who is personally responsible for all debts and liabilities- How is a sole proprietorship formed?
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Generally requires only obtaining necessary business licenses and registering a business name if required by state law- What is the personal liability exposure for a sole proprietor?
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Unlimited personal liability for all business debts and obligations- How are sole proprietorship income and taxes handled?
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Business income is reported on the owner's personal tax return; no separate business tax entity- What happens to a sole proprietorship if the owner dies?
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The sole proprietorship terminates- Can a sole proprietor hire employees?
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Yes, but the owner remains personally liable for all business obligations- What is a general partnership?
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A business formed by two or more people who agree to operate a business together and share profits- In a general partnership, what is each partner's liability?
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Each general partner has unlimited personal liability for all partnership debts and obligations- Can one partner bind the entire partnership to a contract?
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Yes, each general partner has the authority to bind the partnership to contracts in the ordinary course of business- Are general partners personally liable for torts committed by other partners?
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Yes, each partner can be held personally liable for torts committed by other partners in the course of business- How is partnership income taxed?
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Partnerships are pass-through entities; income is taxed at the individual partner level, not at the partnership level- What is a limited partnership?
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A partnership with at least one general partner (with unlimited liability) and one or more limited partners (with liability limited to their investment)- What is the liability of a limited partner?
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A limited partner's liability is limited to the amount of capital they invested in the partnership- Can a limited partner participate in management?
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Generally no; a limited partner who participates in management may lose their liability protection- How is a general partnership typically formed?
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By a written or oral agreement between two or more people to conduct a business together
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