Types of Business Ownership

Aaron Brown

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Sole Proprietorship

-owned and run by one natural person and in which there is no legal distinction between the owner and the business

Advantages- No corporate tax payments, has complete control and decision-making power over the business.

Disadvantages- any risk or damage to company is on the owner, rely on loans and personal assets to initially finance their business

Regulations- must file various tax forms, have to be actively participating

Sole proprietorships are the easiest and most inexpensive forms of business to establish

Examples- bookkeeping, home healthcare, financial advisor, tutoring


-A partnership is an association of two or more persons to carry on a business for profit

Advantages- Partnerships are relatively easy to establish, Partnerships provide moral support and will allow for more creative brainstorming

Disadvantages- Business partners are jointly and individually liable for the actions of the other partners, A partnership usually has limitations that keep it from becoming a large business

Regulations- Partnerships must furnish copies of their Schedule K-1 (Form 1065) to all partners by the date Form 1065 is required to be filed, including extensions

Examples- Real estate, medical

Limited Liability Partnership

-one partner is not responsible or liable for another partner's misconduct or negligence

Advantages- all partners are protected by some form of liability protection, security laws do not generally come into play when the members change ownership

Disadvantages- individual partners are not obligated to consult with other participants in certain business agreements

Regulations- file an IRS Form 1065 once a year, require limited partnership agreements to be in writing

Legal costs of forming a limited partnership can be even higher than for a corporation because in some states they are governed by securities laws.

Examples- Professional Organizations, Taxes and Assets


-is an independent legal entity owned by shareholders. This means that the corporation itself, not the shareholders that own it, is held legally liable for the actions and debts the business incurs.

Advantages- may deduct the cost of benefits it provides to employees and officers,may be able raise additional funds by selling shares in the corporation

Disadvantages- requires more time and money than forming other business structures, Governmental agencies monitor corporations, which may result in added paperwork

Regulations- To amend (change, add or delete) provisions contained in the Articles of Incorporation, it is necessary to prepare and file with the Secretary of State a Certificate of Amendment of Articles of Incorporation along with a filing fee

Examples- Google, Apple, Dr. Pepper

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