SOLE Proprietorships A Business owned and managed by one individual. The oldest and most common form of private business ownership in the US is the sole proprietorship. A sole proprietorship is a business owned and managed by one individual. That person may receive help from others in operating the business but is the only boss; the sole proprietor of the company.

Advantages of Sole Proprietorship Ease of starting: Sole proprietorship is the easiest way to start a business. It involves a minimum number of problems. Control: As the owner is the only boss of the company so he/she has complete control on the operation of the company. Sole participations in profit and losses: All profit earned or losses incurred by operating by the sole proprietor. In contrast, partners share profits and losses.

Use of owners abilities: the owner has everything to loose or gain from his efforts. The chance of personal losses motivated him to devote time, energy and expertise to the operation and success depended largely on the efficient use of his abilities. Tax breaks: A major advantage of the proprietorship is that the business pays no income tax. A corporation pays taxes on profit, its owners, the shareholders also pay taxes on their dividends.

Secrecy: owner filed information on income, expenses, hours, work hours and other times required by income tax regulation. This information typically is not made available to the public. Information such as their especial formula for the product specialty or financial data does not have to be shared with the public because of this sole proprietorship. Ease of dissolving: if the owner decide to dissolve his business for any reason, their would be no legal complication.

Disadvantages Unlimited Liability: Difficulty in raising capital Limitation is managerial ability Lack of stability Demands on time Difficulty in hiring and keeping high achievement employee.

Partnerships A business may have a small beginning as a sole proprietorship, later expand into a partnership and finally become a corporation. A partnership can be based on a written contract or a voluntary and legal oral agreement. The law regards individuals as partners when they act in such a way as to make people believe they operate a business together. So A business owned by two or more people can be called partnership.

Types of Partnership General Partnership: A partnership in which at least one partner has unlimited liability, a general partner has authority to act and make binding decisions as an owner. with the authority to act as an owner, each general partner engage the partnership in binding agreement. Unless a partnership agreement prevents a general partner from making such agreement, the partnership is responsible for all actions of each owner.

Limited Partnership A partnership with at least one general partner and one or more limited partners who are liable for loss only up to the amount of their investment. The general partner arrange and run the business, while the limited partners are investors only. Investors receive special tax advantages and protection from liability. Limited partners legally may have no say in managing the business. If the requirement is violated, the limited partner status is dissolved.

Joint Venture Sometime a number of individuals and businesses join together in order to accomplish a specific purpose or objective or to complete a single transaction. For example, they may wish to purchase a building in downtown in Boston for profit. This would be called joint venture.

The partnership contract A written partnership agreement includes the following main features: Name of the business partnership Type of business Location of the business expected life of the partnership Names of the partners and the amount of each one’s investment Procedure of distribution profits and covering losses Amount that partners will withdraw for services Procedures of withdrawal of fund Duties of each partner Procedures for dissolving the partnership.

Advantages of Partnership More Capital: in sole proprietorship the amount of capital is limited to the personal wealth and credit of the owner. In partnership the amount of capital may increase significantly. A person with a good idea but little capital can look for a partner with the capital and/or credit standing to develop market the idea. Combined managerial skills: In partnership, people with different talents and skill may join together. One partner may be good at marketing; the other may be expert on accounting and financial matters. Combining these skills could provide a greater chance of success.

Ease of starting: Because it involves a private contractual arrangement, a partnership is fairly easy to start. It is nearly as free from government regulation as a sole proprietorship. The cost of starting partnership is low ; it usually involves only a modest legal free for drawing up a written agreement; which is highly desirable. An oral agreement is sufficient but not recommended. Clear legal status: Over the years, legal precedents for partnerships have been established through court cases. The questions of rights, responsibilities, liabilities and partner duties have been covered. Thus the legal status of the partnerships is clearly understood; lawyer can provide sound legal advice about partnership issues.

Tax advantages: The partnerships has some potential tax advantages over a corporation. In a partnership, as in a sole proprietorship, the owners pay taxes on their business earnings. But the partnership, as a business, does not pay income tax.

Disadvantages of a partnership Unlimited liability Potential disagreements: decisions made by several people (partners) are often better than those made by one. However, having two or more people deciding on some aspect of the business can be dangerous. Power and authority are divided and the partners will not always agree with each other. As result poor decision may be made. Also decision making becomes more time consuming because agreement must be reached before action can be taken.

Investment withdrawal difficulty: A person who invests money in a partnership may have a hard time withdrawing the investment. It is much easier to invest in a partnership than to withdraw. The money typically considered as “frozen investment”, is tied up in the operation of the business. Limited capital availability: The partnership may have an advantage over the sole proprietorship in the availability of capital, but it does not compare to corporation in ability to raise capital. In most cases partners have a limited capability and can not compete in business requiring large outlays. The amount of capital a partnership can raise depends on the personal wealth of the partners and their credit ratings.

Corporation A business that is a legal entity separate from its owners. Types of Corporations: Private: Attempts to earn a satisfactory profit. Public: Owned and run by the government. Closed: Stock held by only a few owners and not actively sold on the stock market. Open: Stock held by numerous people and actively sold on the stock market. Domestic: Incorporated in one state or country and doing business within the state or country. Foreign: Incorporated in one state or country and doing business in another state or country.

Alien: Incorporated in one nation and operating in another nation. Nonprofit: Service organization incorporated for limited liability status.