Types of Buisness

Sole Proprietorship/ Partnership/Corporations

Proprietorship

Structure


  • Business is owned and operated by a single person

Advantages



  • Sole has full pride in owning the business and receives all profits.
  • The proprietor can make decisions quickly, without having to consult, or check with, a co-owner or boss.

Disadvantages



  • Proprietor has unlimited liability, or complete legal responsibility for all debts and damages arising from doing business.
  • If business has debts the owner's personal assets, such as houses, cars, and jewelry, may be seized to pay these debts.
  • "Financial Capital"- the money needed to run a business or enable it to grow larger is difficult for proprietors to find.
  • Difficulty of attracting qualified employees

Partnerships

Structure


  • Owned and operated by two or more people
  • Articles of Partnership- a legal agreement between part-owners identifying how much money each person will contribute and what role each partner will play in the business. This clarifies how the partners will share profits or losses. The document also describes how to add or remove partners, or even how to break up the business if wanting to close it down.

Advantages



  • Pride in sharing ownership of a business
  • Usually raise more money/ take in new partners to provide funds
  • Partners pay no corporate income tax
  • Multiple talents from partners
  • Larger size, which often makes for more efficient operations

Disadvantages



  • Legal structure is complex. New agreements have to be made when a partner is added or removed.
  • Owners have unlimited liability; Each owner is fully responsible for all debts of the partnership

Corporation

Structure

  • Charter-a government document granting permission to organize; including the name, purpose, address, and other features of the business.
  • The charter also specifies the amount of stock- ownership shares of the corporation that will be issued.
  • Stockholders-people who become part owners of the corporation by buying stock.
  • Money from stocks are used by the corporation to set up and run the business
  • Board of Directors- people who act on the half of the stock holders

Advantages

  • Ease of raising financial capital; ability to sell stocks
  • Ease of borrowing large sums of money
  • Large corporations
  • Professional managers to run business/ board can replace them
  • Ownership of the corporation can be easily transferred
  • Limited liability

Disadvantages

  • Expensive and complex to set up
  • Business owners have very little say in the management of the business
  • More regulation by the government; they must release certain reports on regular basis
  • Stockholders are subject to double taxation or paying taxes twice on the corporate profits