1. Individuals, Natural Persons, and Sole Proprietorships
Chapters in this video
- 0:00 Natural person versus artificial legal entities
- 1:06 Individual accounts and the probate default trap
- 2:56 TOD and POD: the probate bypass mechanism
- 3:12 Sole proprietorship formation and zero legal separation
- 4:02 Unlimited personal liability and the asset risk
- 5:18 Pass-through taxation on Schedule C of Form 1040
- 6:15 Death of the owner: business ceases to exist
- 6:37 Head-to-head feature comparison table
- 7:18 Rapid-fire exam recap
What this video covers
- What distinguishes a natural person from artificial legal entities like corporations, trusts, and partnerships
- Why individual account assets default to probate at death, and the exact role of transfer-on-death (TOD) and payable-on-death (POD) designations in bypassing probate
- The zero legal separation between a sole proprietor and the business, and why the business ceases to exist at the owner's death
- Unlimited personal liability as the defining disadvantage of sole proprietorships, with personal assets exposed to business creditors
- Pass-through taxation via Schedule C on the owner's personal Form 1040, and why no separate business tax return exists
- Self-employment tax obligations on net business income, covering Social Security and Medicare contributions
- How sole proprietorships contrast head-to-head with limited liability companies (LLCs) and corporations on liability protection
Read the full lesson, free
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