NEW
Font size
WorksheetsRole and Function of Profit and Taxes in Business
Total questions: 20
Worksheet time: 10mins
A Sole Proprietorship is defined as:
A business owned and operated by one person
A partnership between two or more individuals
A corporation with multiple shareholders
What is the taxation of a Sole Proprietorship?
Owner's claim business taxes on their own personal income tax return.
They are reported to the IRS directly.
They are reported on a partnership tax return.
What is an advantage of a Sole Proprietorship?
Simple to set up and operate
Shared decision making
Double taxation
What is one disadvantage of a Sole Proprietorship?
Unlimited liability
Complete control
Tax benefits
A Partnership is defined as:
a business in which two or more individuals manage and operate the business.
a type of business entity that is owned and run by one individual.
a legal entity that is separate and distinct from its owners.
What is the taxation of a Partnership?
Equally among partners
Profits and losses are passed through to the partners' personal income tax returns.
Randomly
What is one advantage of a Partnership?
Easy to form, with the ability to combine capital
(money), experience, and/or abilities
No need for a formal agreement
Complete control by one partner
What is one disadvantage of a Partnership?
Potential for disagreements between partners
Easy to form
Limited resources
A Limited Liability Company (LLC) is defined as:
A hybrid structure, gives owners the advantages of corporations and either sole proprietorships
or partnerships.
A corporation that is taxed separately from its owners.
A sole proprietorship with limited liability protection.
What is the taxation of an LLC?
Taxes are claimed only on individual members personal income tax return
Profits and losses are retained within the LLC and taxed at the corporate level.
Profits are passed through to the owners, but losses are retained within the LLC.
What is one advantage of an LLC?
Limited liability, meaning personal assets cannot be taken to pay debts
Higher taxes
Unlimited liability
What is one disadvantage of an LLC?
Limited liability protection
More complex to form and operate and higher taxes
Flexibility in management
What is the definition of an S Corp?
An S Corp is a type of corporation that elects to pass corporate income, losses, deductions, and credits through to their shareholders
What is the taxation of S Corp?
Taxed as a partnership to help smaller businesses avoid dual taxation.
What is an advantage of an S Corp?
Can save on taxes by avoiding double taxation
What is a disadvantage of an S Corp?
Must have 100 or fewer shareholders and adhere to a number of other government policies.
What is the definition of a C Corp?
A C Corp is a legal entity separate from its owners (shareholders) where profits are subject to double taxation
What is the taxation of a C Corp?
C Corps are subject to dule taxation and file their own federal income tax returns
What is an advantage of a C Corp?
Limited liability, can continue to operate indefinitely, even if there are changes in ownership or if shareholders die
What is a disadvantage of a C Corp?
Subject to more government regulations and taxation than other business structures
