Types of Business

by:davin wilhelm

Proprietorships

- sole proprietorship- operated by a sole or single person


Advantages

- person has full pride in owning

-receives full profits

- makes decisions easy and fast


Disadvantages

- unlimied liability

-complete responsibility pn debts and damages

- owners personal assests may be seized

- difficult to raise financial capital

- can't attract qualified employees

Partenerships

- instead of taking out a loan to expand, a business that two or more people own


Structure-


  • draw up a article of partnership



- how much money each will contribute

- what role each will play

- share profits and losses

-how to break up the business


General - all are responsible for the management and finacial obligations of the busness


limited-It is a partnership in which only one partner is required to be a general partner


Advantages-

  • Businesses as partnerships do not have to pay income tax; each partner files the profits or losses of the business on his or her own personal income tax return. This way the business does not get taxed separately.
  • Easy to establish.
  • There is an increased ability to raise funds when there is more than one owner
  • Wider pool of knowledge, skills, and contacts.
  • Improved management with more than one owner.



Disadvantages-

  • Partners are jointly and severally liable for the actions of other partnership , the third party can sue any one of the partners without suing all of them.
  • Each partner is individually liable for the debts and obligations of the business;
  • A partner cannot transfer interest in the business without the unanimous consent of the partners.
  • Partnerships can potentially be unstable because of the danger of dissolution if one partner wants to withdrawal from the business or dies.
  • Coporations

    Structure- corporation is a separate legal and tax entity created by individuals who offer money, property or both for the corporation’s capital stock.

    -

    The corporation remains separate from those who manage and control the operations of the business.



    advantages-


  • There is a pooling of capital from many investors and it is therefore easier to get the business up and running.

  • Shareholders are not personally liable for the debts of the corporation.

  • disadvantages-


  • Have to file Articles of Incorporation with the Minnesota Secretary of State and a filing fee.

  • Double taxation. The profits of the corporation are taxed as they are earned at a corporate level, and the profit is also taxed to the shareholders when it is distributed out as dividends.

  • Shareholders that control and own a significant amount have a dominant voice in the management of the business in comparison to shareholders that do not own as much stock.