MCGRAW-HILL'S TAX.OF INDIV.+BUS.2020
MCGRAW-HILL'S TAX.OF INDIV.+BUS.2020
20th Edition
ISBN: 9781259969614
Author: SPILKER
Publisher: MCG
Question
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Chapter 15, Problem 1DQ
To determine

List the most common legal entities that are used for operating a business. Discuss how these entities are similar and different for state law purposes.

Expert Solution & Answer
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Explanation of Solution

The following are the most common legal entities that are used for operating a business:

  • Corporations.
  • Limited liability Companies (LLCs).
  • Partnerships.
  • Sole Proprietorships.

The following are the similarity of the above entities for state law purposes:

  • The state laws protect all the members or owners of Corporations and LLCs from personal legal entities.
  • Corporations, Limited liability Companies (LLCs), and Partnerships are identified as business entities for state law purposes.

The following are the differences among the above entities for state law purposes:

  • The legal rights and responsibilities, and number of owners of each entity are different from other.
  • The tax rule to determine tax on the entities and their owners are different from each other.

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