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ENTERPRISES, ENTITIES, AND ALL THAT

NIGEL A.L. BROOKS

THE BUSINESS LEADERSHIP DEVELOPMENT CORPORATION

Article reprint
ENTERPRISES, ENTITIES, AND ALL THAT

The word "enterprise" means "undertake for a prize or cause." An


enterprise is a group of activities organized as a business for profit, as a
not-for-profit association, or as a government agency, and comprises one
or more entities. An entity is formed, organized, and operated under
Federal and/or state laws, which may permit or deny certain activities.
Operators of enterprises have to be aware of those entities that are
suitable to their situation.

Enterprises...

Entrepreneurs transform ideas into products and/or services or causes


through activities that may ultimately become enterprises. Under Federal
and/or state laws, these activities must be conducted through appropriate
legal vehicles. A legal vehicle is the type of entity for a specific situation
based upon purpose, location of property (situs), and physical presence
(nexus). The choice of legal vehicle and nexus determines the protections
that are available for assets and the methods of taxation or exemption from
taxes.

Associations, organizations, businesses, and not-for-profits...

An association represents a group of individuals who have voluntarily


formed an organization to achieve a certain purpose. An organization is a
generic term for an enterprise, entity, or a component thereof.

A business is an occupation, profession, or trade delivering products


and/or services for an intended profit. "Not-for-profit" is a general term;
"non-profit" entities include those that are exempt from certain taxes under
the Internal Revenue Code and state laws. Non-profits are associations
that are either unincorporated or incorporated, or trust funds and
foundations. Their activities address agricultural, arts and entertainment,
educational, health care, labor, religious, social, scientific, sports, or other
charitable causes. Government agencies exist at Federal, state, county, and
municipal levels.

An organizational unit is a component of an enterprise, such as a division,


department, branch, plant, product line, business line, or business unit.
Organizational units can exist within or across entities.

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Entities...

A legal entity exists either as an individual or a corporation; a business


entity has an accounting and tax reporting structure. A legal (juristic)
person is either an individual natural person, or an entity as a group of
natural persons behaving collectively as if they were a single individual.
An entity is domiciled in the jurisdiction where it is organized or
incorporated, or lives permanently if a natural person. If an entity has
nexus in multiple jurisdictions, then it is subject to both domestic laws and
foreign for local transactions, including taxation. All jurisdictions have
licensing requirements for certain activities, and may have to grant
authority to transact business before operations can begin locally.

For example, an entity incorporated in Arizona is considered to be foreign


in California; an entity incorporated in the United Kingdom is considered
to be foreign in both Arizona and California.

Sole proprietorship:

● Simplest business structure

● Unincorporated business owned by one individual proprietor

● Proprietor liable for obligations

● Files schedule C or F on the individual proprietor's "1040" tax return

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Partnership:

● Formed by an agreement as a general partnership between two or


more persons (active partners), or as a limited partnership (one or
more passive partners and one or more active general partners) -
includes joint ventures and syndicates

● General partners are liable for obligations

● Files "1065" tax return; tax liability is passed to individual partners


via schedule K-1

● If a husband and wife operate an unincorporated business, then it is


treated a partnership - however, they may be able to elect for
treatment as a qualified joint venture if there are no other partners and
if they are both active - this election creates two sole proprietorships
on an individual joint tax return

For profit corporation:

● Formed by articles of incorporation

● Owned by persons who are shareholders, who elect directors, who in


turn appoint officers

● Legal entity separate from its shareholders with its own bylaws

● Liable for its obligations separate from the shareholders, directors,


and officers

● Files "1120" tax return and is either taxed on income in its own right
with dividends taxed on the shareholders' returns (C corporation), or
as a pass-through where the entire income tax liability is passed to
shareholders via schedule K-1 (S corporation)

● As a "professional" corporation, activities may be restricted to


licensed professions

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Limited liability company:

● Formed by articles of organization

● Owned by one or multiple persons under an operating agreement,


who are members and in turn may appoint managers if not member
managed

● Liable for its obligations separate from the members and managers

● If it comprises multiple members, files a tax return and elects to be


treated as either a partnership or a corporation; if it comprises a single
member only, then it may file a tax return as a corporation, or be
disregarded and treated as either a division of a corporation or a sole
proprietorship

Limited liability partnership:

● Formed as either a general limited liability partnership or limited


liability limited partnership by two or more persons

● Activities may be restricted to certain licensed professions

● Qualifies for limited liability status with the approval of its partners

● Liable for its obligations separate from the partners

● Files "1065" tax return; tax liability is passed to individual partners


via schedule K-1

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Unincorporated association:

● Formed by a group of individuals by a charter or agreement, whether


organized for profit or not

● May have to file its charter or agreement with a government agency


in the local jurisdiction

● May obtain tax exempt status if organized for not-for-profit activities

Non-profit corporation or limited liability company:

● Formed by articles of incorporation or organization

● Organized by persons who are members, who elect directors or


trustees, who in turn appoint officers

● Legal entity separate from its members with its own bylaws or
operating agreement

● Liable for its obligations separate from the members, directors or


trustees, and officers

● Has obtained tax exempt status from Federal and/or state jurisdictions

● Files "990" tax return if exempt from Federal income tax, which are
open to public inspection

● May be eligible to receive public and private grants

Other types of entities include estates, trusts, employee benefit plans, and
debtors in bankruptcy.

***

The enterpriship disciplines of entrepreneurship, leadership, and


management apply to businesses, not-for-profits, and government agencies
because they all have to transform ideas in income, influence others, and
manage resources. Whether organized for profit or not, management has to
be concerned about managing capital, net assets, or funds, and earning
income, whether it be revenue sourced from sales, membership fees, or
taxes.

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For more information...

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www.understandingpersonalstyles.com/demo

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About Nigel A.L Brooks...

Nigel A.L Brooks is a management consultant to entrepreneurs, business


enterprise owners, executives, and managers, and the enterprises they
serve. He specializes in developing the entrepreneurial, leadership, and
managerial competencies that build sustainable advantage from vision to
value. He is an author and a frequent speaker.

He obtained his professional experience as a partner at Andersen


Consulting (now Accenture, Ltd.), as a vice president at Booz Allen
Hamilton, Inc. (now Booz and Company), as a senior vice president at the
American Express Company, as president of Javazona Cafes, Inc., and as
president of The Business Leadership Development Corporation. He has
been a contributing editor for the Bank Administration Institute magazine,
and has served on boards of entrepreneurial networks. He was educated at
the University of Exeter, Devon, United Kingdom.

His clients are in the financial services, food services, high-tech,


manufacturing and distribution, pharmaceuticals, oil and gas, professional
services, retail and wholesale, transportation, and government industries.

He has experience in North and Latin America, Europe and Asia-Pacific.

www.nigelalbrooks.com

About The Business Leadership Development Corporation (BLD)...

The Business Leadership Development Corporation is a professional


services firm that works with entrepreneurs, lifestyle business enterprise
owners, executives, and managers, and the enterprises they serve.

BLD develops entrepreneurial, leadership, and managerial competencies


that achieve performance excellence by building sustainable advantage
from vision to value through:

 Strategic Management Consulting


 Executive Coaching and Mentoring
 Professional Training via The Center For Business Leadership
Development (CBLD)
 Motivational Speaking

www.bldsolutions.com

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THE BUSINESS LEADERSHIP DEVELOPMENT CORPORATION
13835 NORTH TATUM BOULEVARD 9-102
PHOENIX, ARIZONA 85032 USA
www.bldsolutions.com
(602) 291-4595

© Copyright 2008-10: The Business Leadership Development Corporation


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