Forms of Business Ownership
BY: LAUREN HARTMANN
Become a Business Owner Today
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.