NCA Business Organizations cheat sheet
NCA Business Organizations · Keep the key ideas within reach.
Business Organizations
Sole proprietorship: one owner, no separate legal entity; owner has unlimited personal liability and reports business income on personal return (Schedule C).
General partnership: two or more persons carrying on a business for profit; each general partner has unlimited joint and several liability and equal management rights absent agreement.
Limited partnership (LP): requires at least one general partner (unlimited liability) and one limited partner (liability capped at investment); limited partners forfeit limited liability if they take part in control.
LLC: separate legal entity with limited liability for all members; default tax treatment is pass-through (partnership for multi-member, disregarded for single-member) unless an election is filed.
S corporation: requires IRS Form 2553 election, no more than 100 eligible shareholders, only one class of stock, and no nonresident-alien, corporate, or partnership shareholders.
Corporation: separate legal person with perpetual existence, centralized management by a board, limited liability for shareholders, and default C-corporation double taxation.
Piercing the corporate veil requires showing misuse of the entity form such as commingling funds, undercapitalization, or fraud, generally plus injustice to a claimant.
Agency: a principal is bound by an agent's acts when the agent holds actual authority (express or implied) or apparent authority created by the principal's manifestations.
Fiduciary duties of partners, members, and officers include the duty of care and the duty of loyalty; the business judgment rule shields directors from liability for informed, disinterested decisions.