Four Major Types of Business
Sole Proprietorship, Partnership, LLC, Corporation
a person who owns the business and is personally responsible for its debts.
-establish instantly, easily and inexpensively
-don’t need to pay unemployment tax on himself or herself
-Owners may freely mix business or personal assets.
-Owners are subject to unlimited personal liability for the debts, losses and liabilities of the business.
-Owners cannot raise capital by selling an interest in the business.
-Sole proprietorships rarely survive the death or incapacity of their owners and so do not retain value.
Policies or Regulations Follow
-no formal filing or event is required to form a sole proprietorship
-You need not pay unemployment tax on yourself, although you must pay unemployment tax on any employees of the business
- 22.5 million sole proprietors by 2008
- those previous proprietors made 265 billion dollars, which was about a 5 percent drop from the 2007 figure
- the average annual net income of a sole proprietorship was only $12,000
- more sole proprietorships are being formed as secondary sources of income or part-time jobs.
-Walmart, JC Penny and Ebay all started out as sole proprietorships
-A legal form of business operation between two or more individuals who share management and profits.
- two heads (or more) are better than one
- more capital is available for the business
- business is easy to establish and start-up costs are low
- limited external regulation
- each partner is liable for their share of the partnership debts as well as being liable for all the debts
- risk of disagreements and friction among partners and management
- each partner is an agent of the partnership and is liable for actions by other partners
Policies or Regulations to Follow
- Partners owe fiduciary duties to the partnership
- Profits made in the course of the partnership’s business belong to the partnership.- Each general partner has the right to participate in the management of the partnership
-partnerships in 2008: 3,146,006 partnerships
-total net income in 2008: $458.2 billion
-Ben & Jerry’s
Limited Liability Company
-owners of the LLC, called "members", are protected from some or all liability for acts and debts of the LLC depending on state shield laws.
-Much less administrative paperwork and record keeping than a corporation.
Policies or Regulations to Follow
-once business is registered, obtain business licenses and permits
-federal income taxes are passed on to the LLC's members and are paid through their personal income tax
-The limited liability company ("LLC") has grown to become one of the most prevalent business forms in the entire United States.-For U.S. federal income tax purposes, an LLC is treated by default as a pass-through entity
-Additional capital can be raised easily through stock markets, etc.
-corporations have double taxation. First of all the corporate income is taxed at a flat rate and then the dividends paid to the shareholders is taxed
Rules and Regulations to Follow
-statutes also operate under the assumption that each corporation will adopt bylaws to define the rights and obligations of officers
-Giant corporations have become so dominant that it has become very hard for small businesses to compete and survive in the United States.
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