ARE 5.0 Practice Management Exam With Verified Solutions Graded A+

5 types of firms - 1. Sole Proprietorship 2. General/Limited Partnership 3. Corporation 4. LLC/LLP 5. Joint Venture Sole Proprietorship - Key Features - 1. One owner 2. Requires only name/location and logo/license 3. Formation: Easy to set up 4. Tax advantage: business expense/loos deducted from gross business income 5. Disadvantage: Owner personally liable for company debts/losses. Personal credit to establish credit/raise capitol 6. Longevity: when owner retires firms closes. General Partnership - Key Features - 1. Two or more people "partners", each partner brings different talent (managers must be "member") 2. Share management/risk/profit 3. Formation: partnership agreement. 4. Tax: income shared by partners and reported on personal tax (disadvantage). 5. Disadvantage: Each partner personally liable and liable for actions of others. Personal assets are vulnerable. 6. Longevity: Typically partnership dissolved when one leaves. Limited Partnership - Key Features - 1. 1+ general partner, 1+ limited partner 2. Share risk/profit, but limited receive portion of profit but no say in management 3. Similar to general otherwise C Cooperation - Key Features - 1. Association of individuals as legal entity 2. 3 levels of people: Stockholder (owner with shared), Director (elected by SH and act in their financial interest, responsible for policy decisions), Officer (elected by D, manage day to day) 3. Created in accordance with statutory requirement: Articles of incorporation by lawyer and filed 4. Benefit: Legally independent from shareholders. Each person only liable for $ invested. If sued personal assets not at risk. Easier to raise capitol through stock sale. 5. Tax advantage : Generally