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Jill Jacobs and Mike Stutz have decided to create a business
Jill Jacobs and Mike Stutz have decided to create a business. They have financing available and have a well-developed business plan. However, they have not yet decided which type of legal business structure would be best for them. Write a memo to them, outlining the types of information they should consider when deciding between a corporation or a partnership.
Expert Solution
The different information to consider when deciding between a corporation or a partnership is:
1. Startup costs: Partnerships are less complex and cheaper to start then corporations.
2. Liability: Partners in a partnership have unlimited liability. They can get their personal assets taken in the event the company cannot pay their debt or obligations. Corporations do not have personal liability. Personal assets cannot be taken if the corporation does not pay their debt. Corporations are considered a separate legal entity.
3. Taxes: Partnerships are considered pass-through entities and all income earned by the business is passed to the owners and taxed on their individual tax return. Corporations are taxed at the entity level. The corporation pays tax.
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