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ARE 5.0 - Business Operation > Business Organization > Flashcards

Flashcards in Business Organization Deck (154)
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1

What are the five types of business organization for an Architecture firm?

Sole Proprietorship
General or Limited Partnership
Corporation
LLC and LLP
Joint Venture

2

Main advantages of a Sole Proprietorship business?

Simplest type of business
Easy setup
Owner does not pay unemployment taxes (only for employees)
Can operate under owner name or fictitious name
Business does not pay taxes

3

Main disadvantages of a Sole Proprietorship business?

Owner has full liability
No distinction between owner and business

4

How taxes are reported and which forms are required for a Sole Proprietorship?

Taxes are reported at personal income of owner
Schedule C
Form 1040
Schedule SE (self-employment tax)

5

Main advantages of a Partnership business?

Do not pay Federal Income Taxes

6

Main disadvantages of a Partnership business?

All partners have equal responsibilities and liability
May be required to pay state and federal taxes
Personal property tax on furniture used by business
Self-employment tax

7

How taxes are reported and which forms are required for a Partnership?

Taxes are reported at personal income of the partners
Schedule K1 and Form 1065

8

What is a fiduciary?

highest legal duty of one party to another. Requires being bond ethically to act in others best interest. Often the task involves finances-managing the assets of another.

9

What is the difference between General Partners and Limited Partners in a Limited Partnership?

General partners are responsible to run the business and are fully liable.
Limited Partners (Silent Partner) are usually investors and poses no liability. Can be a person or a corporation.

10

Main advantages of a Limited Partnership?

Business does not pay taxes.

11

How taxes are reported and which forms are required for a Limited Partnership?

Taxes are reported at personal income of the partners
Schedule K1 and Form 1065

12

Main disadvantage of a Limited Partnership?

May be required to pay state taxes

13

What is a Corporation?

Legal entity separated from its owner.

14

Who are the members of a Corporation?

Officers, Directors and Shareholders

15

What are the two types of corporation?

C and S corporation

16

Main advantages of a C corporation?

No liability to the owners (max. to lose is the investment)
They are governed at state level

17

Main disadvantages of a C corporation

Company pay taxes and shareholders report their dividends at personal income, causing double taxation

18

What are the internal requirements for a C corporation to operate?

Hold at least one meeting each year
Must keep Bylaws at the main office
Must keep voting records by directors
Must keep records of owners' name and percentage
Must have a board of directors

19

How a C corporation file their taxes?

Annually by financial disclosure and statement
Must file Form W2, W4 and SS4

20

What type of taxes a C corporation pay?

State, income, payroll, unemployment, and disability

21

What does the IRS require for a business to operate?

File Form SS-4 (EIN - Employer Identification Number)

22

What is an Article of Incorporation?

Set of formal documents filed with a government body to legally document the creation of a corporation

23

What is the content of an Article of Incorporation?

Name, address, agent for service of process and amount/type of stock

24

What is an Agent of Service?

Person or company assigned to accept the Service of Process (court documents) on behalf of the company. If a lawsuit is about to happen, this person needs to be informed prior it can have legal effect

25

Main advantages of a S corporation?

It enjoyes the benefit of a corporation while being taxed as a Partnership
It does not pay income taxes
Separate assets, no liability to owners
Expenses of shareholders can be counted as business

26

Main disadvantages of a S corporation?

Cannot make international business
Considered a domestic company
Some states do not recognize
Partnerships, Corporations or non-residents aliens do not qualify as shareholders
If profit is invested in the company, owners will still be taxed

27

What are the internal requirements for a S corporation to operate?

Cannot have more than 100 stockholders
Must hold shareholders meetings
Shareholders must receive a reasonable salary (as per market), even if the company is not profitable

28

What are the types of corporation that an Architectural firm can qualify?

General Stock Corporation
Professional Architectural Corporation

29

What is a General Stock corporation?

Legal business entity separated from its shareholders. It has an unlimited number of shareholders, licensed or unlicensed.

30

What is a Professional Architectural Corporation?

Legal business authorized to render professional services, so long as the members (officers, directors and shareholders) are licensed in compliance with the Moscone-Knox Act