E.38 Characteristics and income taxation of business entities Flashcards

A business owned and operated by one individual, with no legal distinction between the owner and the business. Income and losses are reported on the owner’s personal tax return (Schedule C).

A business entity with two or more owners who share profits, losses, and management responsibilities. Income is reported on Form 1065, and partners receive a Schedule K-1 to report their share on personal tax returns.

A partnership where all partners share liability and management responsibilities. Each partner has unlimited personal liability for business debts.

A partnership with at least one general partner (who has unlimited liability) and one or more limited partners (who have liability limited to their investment).

A hybrid business structure that offers the limited liability of a corporation with the tax flexibility of a partnership or sole proprietorship. Income is typically reported on Schedule C for single-member LLCs or on Form 1065 for multi-member LLCs.

A corporation that elects to pass corporate income, losses, deductions, and credits to shareholders for federal tax purposes. Avoids double taxation but must adhere to strict eligibility rules, including a limit of 100 shareholders.

A separate legal entity that pays corporate income tax on profits, with potential double taxation when dividends are distributed to shareholders. Taxed under Form 1120.

A tax levied on sole proprietors and partners to cover Social Security and Medicare, equivalent to the employer and employee portions of FICA taxes. Reported on Schedule SE.

A tax structure where business income is passed directly to owners and taxed at their individual income tax rates, avoiding corporate-level taxation. Applies to sole proprietorships, partnerships, LLCs, and S Corporations.

A tax deduction of up to 20% on qualified pass-through business income under Section 199A, subject to income limitations and eligibility rules.