Biz Types Solutions
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owned - limited liability - making profit - employ - debts - personal liability - shareholders -
Basic forms of ownership
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A business corporation is a for-profit, limited liability entity that has a separate
legal personality from its members. A corporation is owned by multiple shareholders and is
overseen by a board of directors, which hires the business’s managerial staff.
3DUWQHUVKLS A partnership is a form of business in which two or more people operate for the
common goal of making profit. Each partner has total and unlimited personal liability of the
debts incurred by the partnership. There are three typical classifications of partnerships:
general partnerships, limited partnerships, and limited liability partnerships.
6ROHSURSULHWRUVKLS A sole proprietorship is a business owned by one person. The owner
may operate on his or her own or may employ others. The owner of the business has total
and unlimited personal liability of the debts incurred by the business.
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Biz Types Solutions
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Many factors must be considered when choosing the best form of business ownership or structure.
The choice you make can have an impact on multiple aspects of your business, including taxes,
liability, ownership succession, and others
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Easiest and least expensive form of ownership to organize.
Profits from the business flow directly to the owner’s personal tax return.
The business is easy to dissolve, if desired.
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May be at a disadvantage in raising funds and are often limited to using funds from
personal savings or consumer loans.
May have a hard time attracting high-caliber employees or those that are motivated by
the opportunity to own a part of the business.
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Is relatively easy to establish; however time should be invested in developing the
partnership agreement.
With more than one owner, the ability to raise funds may be increased.
Prospective employees may be attracted to the business if given the incentive to
become part of the business
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Profits must be shared with others.
Since decisions are shared, disagreements can occur.
The partnership may have a limited life; it may end upon the withdrawal or death of a
partner.
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Investors have limited liability for the corporation’s debts or judgments against the
corporations.
Generally, shareholders can only be held accountable for their investment in stock of
the company. (Note however, that officers can be held personally liable for their actions,
such as the failure to withhold and pay employment taxes.)
Corporations can raise additional funds through the sale of stock.
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The process of incorporation requires more time and money than other forms of
organization.
Corporations are monitored by federal, state and some local agencies, and as a result
may have more paperwork to comply with regulations.