2. • CORPORATIONS – Under State Law Corporations Are Considered
Legal Persons Separate and Distinct From their Shareholders.
Officers, Directors and Shareholders are not liable for Corporate
Actions
• There are many Classifications of Corporations in the U.S.”
• General Business Corporations
• Not-for-Profit Corporations – This doesn’t mean they don’t
make a profit – they simply have no shareholders
• Closely Held Corporations
• Professional Corporations – All shareholders must be licensed
members of the particular profession – doctors, lawyers,
engineers, accountants, actuaries, etc.
Domestic business forms -
CORPORATE
3. • A “C” Corporation is a regular domestic business
corporation. For tax purposes, there is a tax on the
corporation and a tax on the shareholders when they
receive dividends from the Corporation. Dividends paid to
shareholders are NOT deductible by the Corporation (Tax
Form is 1120)
• Subchapter S Corporations – Sometimes called Small
Business Corporations – There is No Tax at the Corporate
Level – All taxes are at the Shareholder Level (Tax Form is
1120 S)
TAX ATTRIBUTES OF DOMESTIC
CORPORATIONS
4. • Limited Liability Company (LLC) – These organizations have
MEMBERS instead of Shareholders. Members are not personally
responsible for the actions of the Company. Limited Liability
Companies may be taxed as Partnerships or as Corporations –
Often it is said these companies have the “best of both worlds.”
• Partnerships – These are organizations which have no legal
existence separate from their partners. Partners are each
personally liable and the liability is joint and several so any
partner may be held liable for the actions of the partnership but
each partner held liable would have a right of contribution from
the other partners for any personal liability
Other domestic business forms
5. • LIMITED LIABILITY PARTNERSHIP – Partnerships formed under State Law in such
a way as to eliminate personal liability of each partner separately. Often Law
Firms are formed as LIMITED LIABILITY PARTNERSHIPS - Tax Form: 1120 S or
1065
• JOINT VENTURES – These are simply an aggregate of individuals or companies
that have allied themselves for a particular purpose. Their relationship is set
forth in an agreement known as a “Joint Venture Agreement”
• SOLE PROPRIETORSHIPS – These are exactly what the name implies – a person
simply doing business in his/her own name. The business owner may elect to use
a FICTITIOUS NAME and this name is registered with the State so that the public
is on notice as to the true owner of the business. Example : John Doe has
established a Pest Control Business and he has decided the name of his company
is TRAVEL AGENT FOR ROACHES – He will file this as a fictitious name with the
State – “John Doe d/b/a Travel Agent for Roaches” These companies use
“Schedule C” to report Business Earnings
More domestic business forms
6. • In Civil Law States Such as France and Germany, Every form of
business organization is a “Company”
• In France These are Called “Societe Anonyme”
• In Germany These are Called “Gesellschaft”
• These Organizations Must Register With the State (Country)
• In France, all companies are regarded as being “juridical
entities” meaning they have a legal existence separate from
their owners.
• In Germany, as in the United States, Corporations are “Juridical
Entities” but Partnerships are NOT
• Partnerships (In the U.S. and Germany) are made up of
members who are each liable to the full extent of personal
assets for partnership debts
BUSINESS FORMS IN CIVIL LAW STATES (France and Germany)
7. CIVIL LAW CORPORATIONS
∗ There are Two Kinds of Civil Law Corporations: Stock
Corporations and Limited Liability Companies Limited
Liability Companies are often used in setting up subsidiaries
∗ The Stock Corporation (Societe Anonyme in France and
the Aktiengesellschaft or AG in Germany) is the only Civil
Law Company that Can Raise Money in the Public
Marketplace
∗ These are formed in a way similar to the way U.S.
Corporations are formed by Filing Articles of Incorporation
8. ∗ In France These Are Called “Societe en nom collectif or
SNC” They have SEPARATE legal existence
∗ In Germany These are Called “Offene Handelsgesellshaft”
∗ These are companies of two or more persons to carry on
a business – If a partnership, once created is reduced to
one person it may continue (Not in U.S. or France where
Winding Down Begins)
∗ In Germany if one person purchases a partnership he or
she may continue to conduct business by himself/herself
indefinitely
CIVIL LAW PARTNERSHIPS
9. ∗ In France these are called “Societe en Commandite
Simple – SCS”
∗ In Germany these are called “Kommanditgesellschaft
– KG”
∗ At least one Partner must be a General Partner
∗ Limited Partners Have limited Personal Liability
∗ Limited Partners may Invest only Cash or Property
(as in the U.S.) In Germany Services are Recognized
as A contribution of Capital
CIVIL LAW COUNTRIES – LIMITED
PARTNERSHIPS
10. ∗ In Germany (as in the United States)
partners are taxed individually
∗ In France Partnerships May Elect to Be
Taxed as an entity OR have partners
taxed individually – This Would be
Similar to an LLC in the United States
TAXATION OF PARTNERSHIPS IN
CIVIL LAW COUNTRIES
11. ∗ Partnerships Generally Involve the Sharing of
Profits and Losses
∗ In Some Countries, the Partnership
Agreement May Include a “Leonine Clause”
which excludes a particular partner from
sharing in losses.
∗ In France a “Leonine Clause” is VOID
LEONINE CLAUSES
