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
- it is a one person show
- the owner gets all of the income
- 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:
run by two or more people
all partners are responsible
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:
more flexible than a corporation
charging order is higher
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