@port.clayton
1. Who can be partners in a partnership?
General Partnership
Formation:
No formalities
No filings, formed based on written or oral agreement
Capitalization:
Resources of general partners
Operation:
Each partner has the right to equal participation in management. Can restrict management rights to one or more partners.
Liability:
Partners are jointly and severally liable for any partnership obligation.
Transferability:
Partner may transfer financial interest without loss of rights, duties, and liabilities as partner.
Taxation:
Tax reporting entity only. Partners subject to tax.
Termination:
Dissociation followed by dissolution and winding up.
Limited Partnership
Formation:
Must file written certificate of limited partnership with the state.
Capitalization:
Resources of general and limited partners.
Operation:
General partner has full management rights and limited partner has no management rights.
Liability:
General partner has unlimited liability for partnership obligations and limited partner liable only to the extent of capital contribution.
Transferability:
General partner may transfer financial interest without loss of rights, duties, and liabilities as a partner. Limited partner may assign interest.
Taxation:
Tax reporting entity only. Partners subject to tax.
Termination:
Event of withdrawal of a general partner.
Limited Liability Partnership
Formation:
Must file with secretary of state and maintain professional liability insurance.
Capitalization:
Resources of partners.
Operation:
Favorable form of organization for professionals such as CPAs, lawyers, etc. All partners are general partners with limited liability.
Liability:
Not personally liable for partnership obligations except to extent of LLP’s assets. Partners remain personally liable for their own malpractice.
Transferability:
Partners may transfer financial interest without loss of rights, duties, and liabilities as partner.
Taxation:
Tax reporting entity only. Partners subject to tax.
Termination:
Dissociation followed by dissolution and winding up.
2. Who can be shareholders in an S Corp?
Eligibility:
1. Qualified corporation
– must be a domestic corp.
– can own an interest in C corp. but may not file a consolidated tax return with the C corp.
– may also create a qualified S subsidiary in which S corp. owns 100% and the two S corps. would file as one entity for tax purposes
2. Eligible shareholders
– individual, estate, certain types of trusts (grantor/voting), qualified retirement plans, 501(c)(3) charitable organizations,
– may not be a nonresident alien
– corporations and partnership are not eligible shareholders
3. Shareholder limit
– no more than 100 shareholders
– family members may be elected to be treated as one shareholder (common ancestors, lineal descendants of common ancestors, and their current/former spouses)
4. One class of stock
– differences in common stock voting rights are allowed
– preferred stock is not permitted
3. Who can be shareholders in a C Corp?
– no restrictions on who can be shareholders
A) do not have to be a citizen or a permanent resident
B) can be any individual or entity
BEC = 72 (6/08/16)
FAR = ?
REG = ?
AUD = ?
.