The Ernst and Young Business Plan Guide

1
The Ernst and Young Business Plan Guide

• Chapter 3Legal Forms of a Business

2
Importance of Legal Form

• Liability
• Control
• Ease of Bringing in New Investors
• Taxes

3
Sole Proprietorships

• Max Simplicity
• Greatest Control
• No Personal Liability Protection
• One Owner (maybe married couple in WA)

4
Partnerships

• Two or More Owners
• Similar Advantages and Disadvantages to Sole
  Proprietorship
• Partnership Agreement

5
Limited Partnerships

• Limited partners Investors
• General Partners Control

6
Corporations

• Costly and Time-consuming
• Unlimited Life
• Corporate Requirements Corporate Veil
• Corporate Taxes Personal Taxes to Shareholders
• Bank Loans-Treat as SP
• Shareholders Owners

7
S Corporations

• Best of Both Worlds?
• No Corporate Taxes
• Income Passes to Owners
• 35 Shareholders
• Corporate Requirements Apply

8
Limited Liability Corporation

• Fairly New
• Liability Protection
• Board of Managers-Op Control
• Similar to a Partnership-Terms Outlined in the
  Operating Agreement (OA)
• New Investors as OA Specifies
• Taxes Per Sole Proprietorship or Partnership
• Has Surpassed Partnerships and S Corps in
  Popularity

9
Review Summary Charts on Page 53-55
10
Questions?