Question

Wally and Sally want to go into business together and plan on offering a tutoring service to high school and college students. Wally proposes that they share control of the business and split profits equally and not bother with a written agreement. Sally, however, is concerned about being able to pay their debts since they will have to rent tutoring space and purchase computers and supplies. She is also concerned about parents and students who may sue if the students' test scores do not improve. She tells Wally that she just bought a new boat and car, and that she does not want her assets to be in jeopardy. She tells Wally that they should form a corporation to shield their personal assets. Wally, however, says their personal assets are not in danger with his proposal because they are a business and that, furthermore, forming a corporation would likely result in double taxation.
A. Is Wally correct with his proposal that because they share control of the business and split profits equally, they will not have any personal liability for debts?
B. Is Wally correct that forming a corporation would likely result in double taxation?
C. What type(s) of arrangement, if any, would avoid double taxation and personal liability for Wally and Sally's endeavor?

Answer 1

Answer:

A. While there is no understanding in the trade, all the accomplices to the trade are by and by obligated for any of the obligations that emerges during the direct of such trade.  

In the specified scenario Wally revealed to Sally that since they share controller of the trade and split profits similarly, they won't have any close to home risk for obligations isn't reasonable as once the assets of industry are short to remuneration the obligations of the industry then the sequestered possessions of the assistants can be connected without any substantial understanding.  

B. The case made by the Wally that shaping a Corporation will bring about twofold tax collection isn't legitimate as when the pay is burdened during the calculations of benefit for partnership then such salary isn't available to different investors.  

C. Wally and Sally can go into an understanding and make a Sequestered Business or the organization constrained by the offers or Limited Liability association which will help them in maintaining a strategic distance from the twofold tax collection just as connection of individual resources if there should arise an occurrence of deficient assets in the business.