Types of Business Ownerships

By: Mandy Brown, 1st Period

Sole Proprietorship

Definition and Advantages and Disadvantages

When one person owns and operates a business, it is a sole proprietorship. That same person recieves all of the company's profits and oversees and manages the entire business.


Advantages:


-Starting a sole proprietorship business is much easier and cheaper than starting a formal corporation. In certain states, you can form a sole proprietorship without having the double taxation standards most businesses usually have.

-When you start a sole proprietorship, you do not have to file a seperate business tax report. By doing this, the owner can save money that would be spent on accounting and tax filing.

-The owner can choose who they hire for their company, and this can lead to tax breaks. The owner can also hire their spouse without formally declaring them as an employee.

-By creating a sole proprietorship business, you have control over all company decisions.


Disadvantages:

-The owner of a sole proprietorship is held responsible for any violations, losses and debts of the business. Therefore, the owner would have to pay for their company's debts with their own money.

-Self-employment taxes are one tax that the owner can not avoid.

-If the owner of the business dies or becomes incapacitated, the business is liquidated and is then a part of their personal estate. It is then distributed to beneficiaries, who can recieve heavy tax consequences from taxes and estate taxes they inherited.

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General Partnership

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Limited Liability Partnership

Corporation

What is a Corporation? What are the Advantages and Disadvantages?

A corporation is a business that is registered by a state and operates apart from its owners. The corporation will still operate even after the owner of the business dies or looses interest. A corporation sells shares of stock, can sue or be sued, purchase services and goods, and perform business transactions.



Advantages:

-Starting a corporation offers limited liability to shareholders

(If the business has debts it can not pay, the sharholders are not held responsible. The owner of the corporation can protect their own assest this way.)

-The business does not die if the owner does or looses interest


Disadvantages:

-Double taxation

(Profits are taxed as income to the corporation, and next they are taxed as income to the shareholder)

-Corporations can be complex and expensive

-Corporations have to have more records and paperwork than other types of businesses


Are there different types of corporations?


Yes, there are two different types of corporations. The first type of corporation is a C corporation, which is a business that pays taxes on earnings. Another fact about a C corporation is that the businesse's shareholders also pay taxes on dividends paid to them. The other type of corporation is a Subchapter S corporation, which are taxed in the same way a partnership is. The businesse's income is passed down to the shareholders, and their individual tax returns report the loss or income of the company.


Below are a few links to examples of corporations:


1. http://www.mcdonalds.com/us/en/home.html

2. http://us.coca-cola.com/home/

3. http://www.lorealparisusa.com/

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Sources:

-Glencoe Business Plan Project Workbook

-http://smallbusiness.chron.com/advantages-disadvantages-corporate-form-business-4389.html

-www.Education-Portal.com