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Transcript of Chapter 7
A sole proprietorship is not a separate legal entity.
The sole proprietor is responsible for all the liabilities of the business, and this is a significant drawback.
Indiana Secretary of State website
Protect your personal assets!
Stock/Ability to raise capitol
Tax accounting can be complicated.
Some of the regulations governing LLCs vary by state.
Because LLCs are a relatively new type of business entity, there is not as much legal precedent available for owners to anticipate how legal disputes might affect their business.
Is a form of business ownership that
is rapidly gaining popularity in the
Along with the Subchapter S, it is a
popular choice for start-up firms.
Number of Shareholders is unlimited
Like a subchapter S, profit and losses are passed through to the tax returns of the owners.
Similar to a C corporation in that the
owners are not subject to personal
liability for the debts or behavior of
The profit of the business is not subject
to double taxation.
Limited to 100 shareholders in Indiana
Sub-chapter S Corporation
A C corporation is taxed as a separate legal entity.
A disadvantage of a C corporation is
that it is subject to double taxation.
This means that a corporation is taxed
on its net profit, and when the same
profit is distributed to shareholders
in the form of dividends, the income is
taxed again on the shareholders’
personal tax returns.
(Unlimited number of shareholders)
Contact the local bar association and ask for a list of attorneys who
specialize in start-ups in your area.
Interview several attorneys.
Select an attorney who is familiar with the start-up process.
Select an attorney who can assist you in raising money for your new
Make sure your attorney has a track record of completing his or her work on time.
Talk about fees.
Select an attorney that you think understands your business.
Learn as much about the process of starting a business yourself as
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
Is a separate legal entity that, in the
eyes of the law, is separate from its
In most cases a corporation shields
its owners, who are called shareholders,
from personal liability for the debts of
A form of business organization where two or more people pool their skills, abilities, and resources to run a business.
The primary disadvantage is that all partners are liable for all the partnership’s debts and obligations.
A corporation is a separate legal entity organized under the authority of a state.
Corporations are organized as either C corporations or subchapter S corporations.
C corporations are what most people think of when they hear the word “corporation.” However, business startups are often organized as subchapter S corporations.
The simplest form of business entity is the sole proprietorship.
A sole proprietorship is a form of business organization involving one person, and the person and the business are essentially the same.
Drafting a founder’s agreement
Choosing a form of business organization
Obtaining business licenses and permits
Avoiding legal disputes
Choosing an attorney
Establishing strong ethical culture
When a business is launched, a form of legal entity must be chosen. The most common legal entities are…
Choosing an Accountant
What kind of leader will you be?
1 Cedar Lane Englewood, NJ 07631
" Ethics is knowing the difference between what you have a right to do and what is right to do. "
How to select an Attorney
Ethical and Legal Issues Facing a New Firm
Choosing a form of business ownership
Issues to Consider in Choosing a Legal Form of Business Ownership
Pro's and Con's of LLC vs S Corp:
a corporate form available in 28 U.S. States, designed for for-profit entities that wish to consider society and the environment in addition to profit in their decision making process. Benefit corporation law differs from state to state. They differ from traditional corporations in regard to their purpose. The purpose of a benefit corporation includes creating general public benefit, which is defined as a material positive impact on society and the environment.
Last November Nestlé, the world’s largest foodmaker and one of the most recognisable household brands, went public with the news it had found forced labour in its supply chains in Thailand and that its customers were buying products tainted with the blood and sweat of poor, unpaid and abused migrant workers.