Sole Proprietorship, Partnership and Corporations The Role of Business Sole Proprietorship, Partnership and Corporations

Starting a Business Entrepreneur: Willing to take a risk to start a business Gather the factors of production Must learn as much as possible about the business Laws, regulations and tax codes

Elements of Business Operation Expenses Purchasing of materials and capital Advertising Customers and vendors know your business Receipts and Record Keeping Tracking of expenses and income Risk Risk and reward is considered the most essential part

What is Profit? Income – All Expenses = Profits Expenses: Wages, Taxes, Parts, Utilities, etc.

Sole Proprietorship Business owned and run by one individual Proprietor = Owner Oldest form and most common business Advantages: Ease of Operation – “You’re the Boss” Potential Profits Disadvantages: Limited Life Limited Funds Limited Abilities Unlimited Liabilities (legally responsible)

Partnership Business owned by two or more persons Limited: partners not sharing equal responsibility General: full duties and responsibilities Advantages: More Money (Capital) Available “Two heads are better than one” Disadvantages: Unlimited Liability Limited Life Limited Funds Partners May Disagree

Corporation Business licensed (charter) by state or federal government as a legal individual Stockholders (shares) are true owners of corporation Advantages: Limited Liability Unlimited Life Easy Transfer of Ownership Disadvantages: Costly and Complicated to set up Double Taxation Corporate and Personal Income Tax