Different types of companies

This information was graciously provided by Jim Marucci of Ernst & Young LLP, who isn't responsible for anything you do with it (see our disclaimer).

The outline format is due to its former life as a PowerPoint presentation.

General and Limited Partnership

• A partnership is an association of two or more persons, that operates a business enterprise for profit.

A Limited Partnership is Similar to a General Partnership Except

• Limited partners are not personally liable for partnership liabilities.
• Limited partners cannot participate in the day-to-day operations of the partnership.

Partnerships Attributes

• Insulation from liability.
• Characteristics of partnership interests.
• Obtaining capital in a partnership.
• Duration of Partnerships.

Limited Liability Companies

• Is a statutory entity.
• Is composed of as few as one member.
• It can conduct any lawful business.
• Members enjoy limited liability.

C Corporations

• Limited liability.
• Operated by a centralized management.
• Continuity of interest.
• Transferring ownership interests.

Various Interests Available in a C Corporation

• Corporations can issue common and preferred stock.
• Corporations can also authorize debt instruments which also may be convertible into options, warrants, and other stock rights.

Formation of a C Corporation

• Articles of incorporation.

"S" Corporations

• All items pass through to the stockholders, much the same as with partnerships.
• Although is basically a flow through entity, there are certain cases in which the S Corporation, itself, will be subject to taxation.

Advantages of Operating as an
S Corporation

• Tax losses can be passed through to the stockholders.
• No double taxation.
• Limited liability for all stockholders.
• Stockholders can participate in the management of the business without jeopardizing their limited liability.

Disadvantages of Operating as an S Corporation

• The requirements must be continuously met to retain such status.
• The allocation of income, gain, loss, deductions, and credits MUST be pro-rata.
• Inadvertent termination is always a distinct possibility.
• Some states do not recognize S status and will tax the entity as a corporation.
• S Corporations cannot deduct fringe benefits on a more than 2% stockholder.

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