Forms of Business Ownership


Different kinds of Business ownership

There are several different kinds of business ownership including, but not limited to: Sole proprietorship, Partnerships, Corporations, and Franchises.

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Sole Proprietorship

It is an unincorporated business owned and run by one individual
  • Easy and inexpensive to form: A sole proprietorship is the simplest and least expensive businesses.
  • Complete control: Because you are the owner of the business, you have complete control over all decisions.
  • Easy tax preparation: Your business is not taxed separately, and tax rates are low.


  • Unlimited personal liability: You can be held personally liable for the debts and obligations of the business.
  • Hard to raise money: You can’t sell stock in the business, investors won't often invest. Sole Proprietorships fail as a business easier.
  • Heavy burden: There is going to be a burden and pressure on keeping the business going. You are completely responsible for the successes and failures.


Is a single business where two or more people share ownership


  • Easy and Inexpensive: Partnerships are generally inexpensive, because costs are split.
  • Shared Financial Commitment: Partnerships have the advantage of combining resources to obtain capital; (securing credit)
  • Adulatory Skills: A good partnership are able to utilize the strengths, resources and expertise of each partner.
  • Partnership Inducement for Employees: Partnerships have employment advantages (if offering others the opportunity to become a partner.) Most employees are highly motivated.


  • Joint and Individual Liability: Partnerships retain shared liability. Partners are also liable for the business debts and decisions made by other partners.
  • Disagreements Among Partners: With multiple partners, there are bound to be disagreements.
  • Shared Profits: Each partner must share the successes and profits of their business.


Is an independent legal entity (a legal construct through which the law allows a group of natural persons to act as if they were a single person for certain purposes) owned by shareholders


  • Limited Liability. Shareholders can generally only be held accountable for their investment in stock of the company.
  • Ability to Generate Capital. Corporations have the ability to raise funds through the sale of stock.
  • Corporate Tax Treatment. Corporations file taxes separately from their owners.
  • Attractive to Potential Employees. Corporations hire high-quality and motivated employees because they offer competitive benefits.


  • Time and Money. Corporations are costly and time-consuming to start and operate.
  • Double Taxing. In some cases, corporations are taxed twice.
  • Additional Paperwork. Corporations are regulated by federal, state, and in some cases local agencies.


Is simply a method for expanding a business and distributing goods and services through a licensing relationship


  • Association a well established brand: If you own a franchise such as Chick-Fil-A, your business will be well known and the business will grow quickly.
  • Aid in lease negotiation and site development. When building your franchise, you will get help from the franchisor and not have to figure everything out on your own.
  • Support in outlet design, equipment purchasing, and advertisements. The franchisor will make business decisions such as how the franchisee promotes the business and it will also help with design ideas.
  • Financial assistance and access to established financial systems.


  • Operate the business the way the franchisor wants. If you own a franchise you have to follow the rules of the franchisor.
  • Restricted territory. The way you promote the business is up to the Franchisor and you must follow their guidelines.
  • Ongoing payment. The Franchisor will request an ongoing payment of fees for owning part of their business.
  • Less control. if you decide to sell your franchise there is usually a set of procedures needed to be followed, including getting the franchisor's approval of the buyer.
  • No Sense of Security. At the end of the franchise term, the franchisor is not obliged to renew the franchise to you.