Types of Businesses

By Cheyenne Lyman

Sole Proprietorship

  • A business owned by one person
  • Advantages: Owner receives all the profits, does not have to consult anyone with decisions
  • Disadvantages: Owner is 100% liable for all debts and damages, it is more difficult to raise financial capital, harder to attract qualified employees.

Partnership

  • A business that 2 or more people own and operate.
  • Articles of partnership: how much money each will contribute, their role, how profits will be shared, and how to add or remove partners.
  • Advantages: Can raise more money than a proprietorship, pay no corporate income tax, each owner brings special talents to the business, slightly large size makes for more efficient operations.
  • Disadvantages: legal structure is complex, owners have unlimited liability.

Corporations

  • organized business recognized by law, has many rights and responsibilities of an individual
  • must get a charter to start one
  • Includes name, address, purpose and amount of stocks to be issued.
  • Use the money from selling stock to set up the business
  • Stockholders elect board of directors that hire managers that run the corporation.
  • Advantages: Easy way to make capital (selling stocks, borrowing money), can grow huge,
  • Disadvantages: expensive and complex to set up, owners have very little say in the company because of stock holders, subject to more regulation by the government, stockholders are subject to double taxes