Entities Overview

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Question 1
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Corporations are legally formed by filing articles of organization with the state in which the corporation will be created.

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Question 2
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General partnerships are legally formed by filing a partnership agreement with the state in which the partnership will be formed.

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Question 3
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Limited partnerships are legally formed by filing a certificate of limited partnership with the state in which the partnership will be organized.

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Question 4
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Sole proprietorships are not treated as legal entities separate from their individual owners.

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Question 5
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S corporation shareholders are legally responsible for paying the S corporation's debts because S corporations are treated as flow-through entities for tax purposes.

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Question 6
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LLC members have more flexibility than corporate shareholders to alter their legal arrangements with respect to one another,the entity,and with outsiders.

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Question 7
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Corporations are legally better suited for taking a business public compared with LLCs and general partnerships.

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Question 8
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Both tax and nontax objectives should be considered when choosing an appropriate business entity.

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Question 9
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Tax rules require that entities be classified the same way for tax purposes as they are classified for legal purposes.

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Question 10
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C corporations and S corporations are separate taxpaying entities that pay tax on their own income.

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Question 11
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All unincorporated entities are generally treated as flow-through entities for tax purposes.

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Question 12
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In certain circumstances,C corporations can elect to be treated as flow-through entities.

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Question 13
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An unincorporated entity with more than one owner is,by default,taxed as a partnership.

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Question 14
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A single-member LLC is taxed as a partnership.

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Question 15
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For tax purposes,only unincorporated entities can be considered to be disregarded entities.

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Question 16
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Unincorporated entities with only one individual owner are taxed as sole proprietorships.

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Question 17
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S corporations have more restrictive ownership requirements than other entities.

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Question 18
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Entities taxed as partnerships can use special allocations to reward owners based on their responsibilities,contributions,and individual needs.

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Question 19
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Sole proprietors are subject to self-employment taxes on net income from their sole proprietorships.

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Question 20
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Shareholders of C corporations receiving property distributions must recognize dividend income equal to the fair market value of the distributed property if the distributing corporation has sufficient earnings and profits.

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