Four Types of Business Ownership

Sole Proprietorship, Partnership, LLP, Corporation

Evan Arnold

Rahn Entrepreneurship

Sole Proprietorship

A type of business entity that is owned and run by one natural person and in which there is no legal distinction between the owner and the business.


Advantages - A sole proprietor has complete control and decision-making power over the business.


Disadvantages - The sole proprietor of the business can be held personally liable for the debts and obligations of the business.


Policies/Regulations - Record tax information on schedule C, which is part of the 1040 personal tax return form. also, you must be actively participating.


Facts

1. A sole proprietorship legally terminates immediately upon the death of the owner.


2. The owner does all of the decision making.


3. Any debts or other losses are the sole responsibility of the owner.


Examples - Tutor, Landscaping, Maid

Partnership

An arrangement where parties, known as partners, agree to cooperate to advance their mutual interests.


Advantages - Two heads (or more) are better than one, Business is easy to establish and start-up costs are low.


Disadvantages - The liability of the partners for the debts of the business is unlimited.


Policies/Regulations - Tax Qualification, Issue Date, and State of Residence


Facts

1. Partners are personally liable for all business debts and obligations.


2. Any individual partner can usually bind the whole business to a contract or other business deal.


3. You don't have to file any paperwork to establish an ordinary partnership.


Examples - Apple & IBM, Spotify & Uber, Google & Luxottica

Limited Liability Partnership (LLP)

A partnership in which some or all partners (depending on the jurisdiction) have limited liabilities.


Advantages - No limit on the amount of owners that can be involved with the business, Limited liability


Disadvantages - Some states do no allow them to form or operate in their region, Additional taxes


Policies/Regulations - The regulations divide registered limited liability partnerships into three categories: registered limited liability partnerships; registered professional limited liability partnerships; and foreign limited liability partnerships.


Facts

1. Flexible form of business


2. More than one owner


3. Has no general partners


Examples - Chrysler, Westinghouse Electric Company, Dougherty & Company

Corporation

An independent legal entity owned by shareholders.


Advantages - The liability of the owners towards the creditors is limited to their investment in the company, Additional capital can be raised easily through stock markets


Disadvantages - In case of corporations there is double taxation, Establishing a corporation is a complex process


Policies/Regulations - As an independent corporation created by Congress and charged with distributing government funds, LSC is governed by federal law.


Facts

1. Corporations dominate the local and global economy


2. It is extremely hard for small businesses to compete with corporations


3. Corporations dominate media and also the financial and political systems


Examples - AT&T, Google, FedEx

Forms of Business Ownership