Forms of Business
Sole Proprietor Definition: Owned & operated by 1 person Unique characteristics: Highest risk of failure of any form of business Most common form in US
Advantages of sole proprietorship Low start up capital Quick decision making & total control Complete liability Easy to form & few legal hurdles All profits High personal satisfaction
Disadvantages of sole proprietorship Lack of longevity Limited life Unlimited liability Limited growth potential Sole responsibility
Partnership Definition: Owned & controlled by 2 or more people Unique characteristics: General partner: daily operations Limited partner: finances, silent partner Fewest in number
Advantages of Partnerships Low startup capital Shared decision making Shared liability based on type Easy to form Few legal hurdles Shared losses & high personal satisfaction
Disadvantages of Partnerships Risky due to conflicts & trust issues Shared profits Lack of longevity Limited lifespan General: unlimited liability Limited: limited liability
Corporations Definition: owned by stockholders & treated by law as an individual Unique characteristics: Publicly owned or closed Earns greatest % of sales
Advantages of Corporations Easy to raise capital Specialization through division of labor Limited liability Longevity/unlimited life Profits to shareholders Satisfaction irrelevant
Disadvantages of Corporations Profits are taxed twice Corporate tax Personal tax Lack of personal satisfaction Very slow decision making Complex setup & many legal considerations
WHAT’S NEXT? STAGES IN THE PRODUCTION PROCESS!