Chapter 15 Key Terms

Question	Answer
Accumulated earnings tax	A tax assessed on C corporations that retain earnings without a business reason to do so.
Articles of incorporation	A document, filed by a corporation’s founders with the state, describing the purpose, place of business, and other details of the corporation.
Articles of organization	A document, filed by a limited liability company’s founders with certain states, describing the purpose, place of business, and other details of the company.
C corporations	A corporate taxpaying entity with income subject to taxation. Such a corporation is termed a “C” corporation because the corporation and its shareholders are subject to the provisions of Subchapter C of the Internal Revenue Code.
Certificate of limited partnership	A document limited partnerships must file with the state to be formally recognized by the state. The document is similar to articles of incorporation or articles or organization.
Certificate of organization	A document, filed by a limited liability company’s founders with certain states, describing the purpose, place of business, and other details of the company.
Corporation	Business entity recognized as a separate entity from its owners under state law.
Disregarded entities	Unincorporated entity with one owner that is considered to be the same entity as the owner.
Dividends-received deduction (DRD)	A corporate deduction for part or all of a dividend received from another corporation.
Double taxation	The tax burden when an entity’s income is subject to two levels of tax. Income of C corporations is subject to double taxation. The first level of tax is at the corporate level, and the second level of tax on corporate income occurs at the shareholder level.
Excess business loss	Excess of aggregate business deductions for the year over aggregate business gross income or gain of an individual taxpayer plus a threshold amount depending on filing status.
Flow-through entities	Legal entities, like partnerships, limited liability companies, and S corporations, that do not pay income tax. Income and losses from flow-through entities are allocated to their owners.
General partnership (GP)	A partnership with partners who all have unlimited liability with respect to the liabilities of the entity.
Initial public offering (IPO)	The first sale of stock by a company to the public.
Institutional shareholder	An entity such as an investment company, mutual fund, brokerage, insurance company, pension fund, investment bank, and endowment fund, with large amounts to invest in corporate stock.
Limited liability company (LLC)	A type of flow-through entity for federal income tax purposes. By state law, the owners of the LLC have limited liability with respect to the entity’s debts or liabilities. Limited liability companies are generally taxed as partnerships for federal income tax purposes.
Limited partnership (LP)	A partnership with at least one general partner with unlimited liability for the entity’s debts and at least one limited partner with liability limited to the limited partner’s investment in the partnership.
Net earnings from self-employment	The amount of earnings subject to self-employment income taxes. The amount is 92.35 percent of a taxpayer’s self-employment income.
Net operating loss (NOL)	The excess of allowable deductions over gross income.
Partnership agreement	An agreement among the partners in a partnership stipulating the partners’ rights and responsibilities in the partnership.
Personal holding companies	Closely held corporations generating primarily investment income.
Personal holding company tax	Penalty tax on the undistributed income of a personal holding company.
Qualified business income (QBI)	Net business income from a qualified trade or business conducted in the United States. This is the tax base for the deduction for qualified business income.
S corporation	A corporation under state law that has elected to be taxed under the rules provided in Subchapter S of the Internal Revenue Code. Under Subchapter S, an S corporation is taxed as a flow-through entity.
Single-member LLC	A limited liability company with only one member. Single-member LLCs with individual owners are taxed as sole proprietorships and as disregarded entities otherwise.
Social security wage base limitation	Limit on the amount of employee compensation and/or net earnings from self-employment subject to the social security tax. The amount is provided annually and is indexed for inflation.
Sole proprietorship	A business entity that is not legally separate from the individual owner of the business. The income of a sole proprietorship is taxed and paid directly by the owner.
Specified service trade or business	Any trade or business involving the performance of services in the fields of health, law, consulting, athletics, financial services, brokerage services, or any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees or owners, or which involves the performance of services that consist of investing and investment management trading, or dealing in securities, partnership interests, or commodities. Architecture and engineering services (their services build things) are specifically excluded from the definition of specified service trade or business.
Unrelated business income	Income from a trade or business, regularly carried on, that is not substantially related to the charitable, educational, or other purpose that is the basis of the organization’s exemption.

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Chapter 15 Key Terms

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	Created by Kalie Carney 9 months ago