3 Business Types
Proprietorship, Partnership, and Corporation
- unincorporated business owned and run by one individual (no partners are involved), with no distinction between the business and its owner.
- complete control and decision-making power over the business.
- Sale or transfer can take place at the discretion of the sole proprietor.
- No corporate tax payments
- Proprietor of the business can be held personally liable for the debts and obligations of the business.
- Additionally, this risk extends to any liabilities incurred as a result of acts committed by employees of the company.
- All responsibilities and business decisions fall on the shoulders of the sole proprietor.
When you start you and your partner draw up a legal agreement called articles of partnership
Clarifies how you will share profits or losses
This determines how much money each of you will contribute and what role each partner will play Clarifies how you will share profits or losses
The pride and sharing ownership some
Can usually use more money because theres multiple owners
Partners don’t pay corporate taxes
- The legal structure is complex
- Someone who wants to star a corporation must get a charter.The charter specifies the amount of stock or ownership shares of the corporation that will be issued
- The stockholders elect a board of directors to act on their behalf
- The board hires management
- The ease of raising finical capital
- If it needs money the corporation can sell more stocks
- Easier to borrow large amounts of money
- Ease of raising capital allows the corporation to grow to be huge
- They often are expensive and complex to set up
- The business owners have very little say in the management of the business
- .Millions of people own the shares of major corporations, but it is difficult for them to unite to force the managers to act in a particular way.
- Corporations are subject to more regulation by government than the other forms of business