Partnerships & LLCs

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Author:
Elliott108nl
ID:
273492
Filename:
Partnerships & LLCs
Updated:
2014-05-07 04:00:59
Tags:
Partnership Partner LLC
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Description:
Partnership taxation
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  1. What is a Partnership?
    Group (unincorporated) formed for a business venture NOT classified as a corporation, trust, or estate.
  2. Entities treated as partnerships for tax purposes:
    • Partnerships,
    • LLCs,
    • LLPs.
  3. Is a gain or loss recognized by partnership or partners when property contributed in exchange for interest in partnership?
    No.
  4. Exceptions to nonrecognition rule:
    • On formation, income recognized when partnership interest is received in exchange for services performed,
    • When partner transfers property subject to liability exceeding partner basis in property transferred.
  5. Partnership does increase risk to personal financial position?
    Yes.
  6. Taxation for Partnership
    Partnership is Not taxed on its income. Income or loss of partnership is allocated to partners according to partnership agreement.
  7. Co-ownership of Property -
    Partnership assets are owned jointly by all partners. Any investment by a partner becomes joint property ∀ partners.
  8. Limited Life
    • Death, bankruptcy, or any event taking away ability of partner to fulfill contract ends a partnership. 
    • Called dissolution.
  9. Mutual Agency
    Any partner can commit partnership to a contract (assuming it is related to the normal business of the partnership).
  10. Unlimited Liability
    Each partner can be called on to pay partnerships' debts.
  11. LLP
    • Protects innocent partners from malpractice or negligence claims resulting from acts of another partner. 
    • When partner does malpractice, only that partner has personal liability for that claim.
  12. S Corporation
    • 100 or fewer stockholders. 
    • Provide stockholders limited liability.
    • S corp does not pay taxes. 
    • Income (loss) of corp is allocated to stockholders for their own personal tax returns.
  13. LLC:
    • Owners (members) have same limited liability as owners of corp. 
    • Treated same as partnership for tax purposes.
  14. Proprietorship
    • Business entity: yes
    • Legal entity:      no
    • Limited liability: no
    • Business taxed: no
    • One owner allowed: yes
  15. Partnership
    • Business entity: yes
    • Legal entity:      no
    • Limited liability: no
    • Business taxed: no
    • One owner allowed: no
  16. LLP
    • Business entity: yes
    • Legal entity:      no
    • Limited liability: limited
    • Business taxed: no
    • One owner allowed: no
  17. LLC
    • Business entity: yes
    • Legal entity:      yes
    • Limited liability: yes
    • Business taxed: no
    • One owner allowed: yes
  18. S Corporation
    • Business entity: yes
    • Legal entity:      yes
    • Limited liability: yes
    • Business taxed: no
    • One owner allowed: yes
  19. Corporation
    • Business entity: yes
    • Legal entity:      yes
    • Limited liability: yes
    • Business taxed: yes
    • One owner allowed: yes
  20. Capital Accounts,
    Withdrawal Accounts.
    One of each for each partner.
  21. Partners do not get salaries - they get a share of profits.
    Their reward is net income (Rev - Exp).
  22. Owners invest cash:
    • Cash  DR
    •          John Doe, Capital   CR
    • Cash  DR
    •          James Dean, Capital   CR

    and so forth...
  23. Assets other than cash:
    • Cost is agreed valuation of contributed assets.
    • This is true for all assets - land, building, A/R, etc.
  24. Division of Income & Loss:
    • No agreement - all equal. 
    • Agreement - according to agreement.

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