Four Types of Business Ownership

Sole Proprietorship, Partnership, LLC, Corporation

Sole Proprietorship- the simplest a business can operate, not a legal entity, it just means a person who owns a business personally and is responsible for it.

Advantages

  • the most simple to run
  • owned by only one person
  • income is taxed once
  • no hassle with partnership
  • is easy to dissolve

Disadvantages

  • if the owner has hardships it can negatively affect the business
  • owner is 100% responsible for all choices made

Policies and Regulations

  • the owner is responsible for all debts and legal liabilities

  • the owner can have people work for them

  • the owner receives all profit

  • all the assets are owned by the owner

Examples: food services, manufacturing, real estate

  • Facts:
    1. it is a one person show
    2. the owner gets all of the income
    3. the owner does all of the decision making

    Partnership- takes place when two or more individuals make a written agreement to run a business

    Advantages

    • allowed for shared responsibilities

    • complementary skills

    • easy and inexpensive

    Disadvantages

    • shared profits

    • disagreement

    • joint and individual liability

    Policies and Regulations: all partners have to contribute to all aspects and be in agreement, everything has to be split up evenly.

    Facts:

    1. run by two or more people

    2. all partners are responsible

    3. they split the money evenly

    Limited Liability Company-characteristics of partnership and corporation

    Advantages

    • choice of tax regime

    • much less paper work

    • protection against investors

    Disadvantages

    • lots of tax

    • not as many investors

    • number of owners

    facts:

    1. more flexible than a corporation

    2. charging order is higher

    3. double taxation

    examples: businesses like Starbucks and at&t

    Corporation- run by a guide of people called board of directors

    Advantages:

    • limited liability

    • reduces share holder amount

    • assets and structure continue beyond life time

    Disadvantages

    • ownership is separated from management

    • substantial fees

    • taxed at a lower rate than income

    facts:

    • consists of various departments

    • business divisions

    • lower tax rates

    Examples: most businesses are corporations like Nike, or dr. pepper

    Forms of Business Ownership