Limitations Of The Old Classification Regulations

A corporation is a separate legal entity that possesses distinctive liabilities and privileges than that of their members or shareholders. As an investor, a corporation’s advantage is liability for their own investments especially in risky investments (Kubasek, et al., 2012, p. 760). Among the various types of corporations for Betty to select from, an S corporation is an enticing venture for new entrepreneurs given that it grants limited personal liability for debts, sharing of corporate profits, and taxation relief. Double taxation is a main disadvantage of C corporations but not for S corporations. The General Corporation Law (Corp C §§100-2319) treats S corporations similarly to partnerships for taxation purposes.

The business entities of corporations and partnerships share many similarities, however key difference exist, primarily in terms of formation, taxes and liability. This section will largely address the issue of liability, in terms of the effects of damages, disclosure requirements and personal liability for both corporations and partnerships. Additionally Amazon will be examined as a partnership rather than a corporation to further illustrate these differences.

There are three types of business entities: sole proprietorship, partnerships, and corporations. Sole proprietorships are businesses owned by an individual person. They are easy to form, but are not taxed. Instead the individual business owner is taxed on any monies acquired on behalf of the business (Kubasek, 2012. Partnerships are businesses that are owned by more than one individual owners. The big thing about partnerships is that each partner is personally responsible for the acts of the other partners in the business . (Kubasek, 2012 Corporations are businesses owned by multiple people to include shareholders (Kubasek, 2012). They can sue and be sued and are subject to a host of rules and regulations set forth by the government.

Is a limited partnership treated as a separate entity for all purposes? If not, give an example of an instance in which a limited partnership is treated as an aggregate of its partners.

A limited liability company protects each partner from personal liability for certain obligations of the company. An important difference from other partnerships is that each partner is liable for the debts and obligations of the partners. With limited liability Company, each state has its own laws governing partners for these vessels. Some states allow only certain professions, such as lawyers and accountants to form LLP. Some states only provide protection from liability for negligence claims, leaving personally responsible for other types of requests partner. For tax purposes, profits are divided equally between the partners and the partnership is not taxed separately.

This protects the limited partners from the full liability that is shared by the general partners.   Income Taxes – The limited partner’s profits are considered personal income and taxed as such. All profits from the limited partnership are considered personal income and taxed at their personal tax rates.  Longevity / Continuity – The continuity of the business is not affected by the death or disassociation of a limited partner.  An advantage for a limited partner is that the limited partner’s investment takes priority in the general partnership dissolves due to a death or disassociation of one of the general partners.

| If all members of a new foreign entity have limited liability, the entity is classified as an association taxed as a corporation.

Convenience/Burden: Limited Partnerships have extra requirements placed upon them to comply with state regulatory requirements. They must maintain a registered agent to represent them in the state in which they were formed. They are also required to file an informational report with the IRS of the profits passed to the general partners.

Federal tax rates on corporate taxable income vary from 15% to 35%. State and local taxes and rules vary by jurisdiction, though many are based on Federal concepts and definitions. Taxable income may differ from book income both as to timing of income and tax deductions and as to what is taxable. Corporations are also subject to a Federal Alternative Minimum Tax and alternative state taxes. Like individuals, corporations must file tax returns every year. They must make quarterly estimated tax payments. Controlled groups of corporations may file a consolidated return. Partnerships have flow-through taxation which means that the entity does not pay taxes on its income. Instead, the owners of the entity pay tax on their "distributive share" of the entity's taxable income, even if no funds are distributed by the partnership to the owners. Estates and nongrantor trusts must file income tax returns just as individuals do, but with some important differences. For one, their income is taxed at either the entity or beneficiary level depending on whether it is allocated to principal or allocated to distributable income, and whether it is distributed to the beneficiaries. And because their exemption amounts, tax brackets and related thresholds haven’t been indexed for inflation or modified for tax relief to the extent those for individuals have, they can be

The alternative minimum tax (AMT) may apply to a trust only in the first tax year.

The last of the four types includes the limited liability company, also known as a LLC. An LLC is an unincorporated form of business that carries characteristics of all of the other three forms of business. An LLC can choose to be taxed as a partnership, the owners can manage the business, and the owners have limited liability for debts and obligations of the partnership. LLC’s are

In fact, the use of general partnerships has diminished across the entire legal industry. As for corporations, typically, corporate status is not sought by small businesses like ours. Usually corporations are much larger. In addition, they require numerous formalities during creation and are not as flexible as the other types of entities. Further, corporations are “double taxed.” What this means is the corporation itself has to pay taxes, yet so do the individual stock holders. Even though corporations do provide liability protection, for the reasons mentioned above, Mainstreeter Law chose not to form as a corporation. Finally, Mainstreeter Law considered forming as a PLLP instead of a PLLC. PLLPs and PLLCs are very similar, so this was a tough choice to make. Ultimately, a PLLP would have been a fine choice, but a PLLC was better. The reason being PLLCs are slightly more flexible. Being Mainstreeter Law is a new business and the practice of law is changing, Mainstreeter Law prioritized picking an entity type that offered the most

The corporation and stockholders have the tax burden in a corporation. In whole, from the owners’ point of view, it is more sensible to form a corporation that has a little more flexibility and less liability versus a partnership or sole proprietorship.

In addition, clause 9 of the legislation proposes to implement the requirement of “Army Reserve’ training to at least 5% of the teachers of a ‘constitutional college’. This proposed of federal regulation on constitutional colleges can be analysed using the decision reached in the Work Choices case. In this, the Court reaffirmed the “object of command test’ as the preferred test to determine whether or not a law falls within the core of the corporations power, and therefore can be validly applied to a corporation. This test dictates that a ‘constitutional corporation is an object of command of a law, permitting or prohibiting a trading or financial corporation from engaging in conduct or forming relationships’.

Although doctrine of separate legal entity has the greatest importance in company law, it contains weaknesses that could be arguable. Professor Kahn-Freund described the doctrine as “calamitous” because it arise many issues, such as “How is it possible to check the one-man company and other abuse of company law?” Separate legal entity is inadequate for complex problems .