Ch. 7: Types of Business Ownership

Sole Proprietorships  Owned and operate by one person  Easiest and Most Popular!  Approximately 76% of all business in the US

Sole Proprietorships  Advantages  Easy  Complete Authority  100% of Profits  No Business Taxes…Business is not separate form the owner

Sole Proprietorships  Disadvantages  Unlimited Liability  Full responsibility for all debts …may be paid from owner’s personal assess  Raising Capital  Total Reliance on Abilities and Sills of the Owner  Death of the Owner Ends the Business

Partnerships  Two or More Owners…Unicorporated  Law Requires a Minimum of 1 General Partner  General Partner  Unlimited Liability and Full Responsibility for the Business  Limited Partners  Liability limited to Investment  Cannot be actively involved in managing

Partnerships  Advantages  Same as Sole Proprietorship…Now with more people  Share Ideas and Investment Capital  Disadvantages  Difficult to Dissolve  Likely ends when a partner dies  PERSONALITY CONFLICTS – Be careful with Family  Laws of Agency – Liable for Each Other

Partnerships  Keys for Success  Share Responsibilities  Contract  Clearly Defined Rolls  Profit Sharing  What to do if a Partner Quits or Dies  Honesty

Corporations  Registered by a State and Operates Apart from its Owners  Continues Existence After an Owner has Sold Interest or Dies  Ownership Equity  Represented by Stock - Shareholders  Same Laws as You and I – 14 th Amendment  Purchase Goods, Sue and Be Sued, & Conduct Business Transactions

Corporations  C-Corp.  Most Common  Business and Owners Pay Taxes  Advantages  Status  Limited Liability  Ability to Raise Investment  Perpetual Existence  Employee Benefits  Tax Advanatges

Corporations  C-Corp.  Most Common  Business and Owners Pay Taxes  Advantages  Status  Limited Liability – Amount Invested  Ability to Raise Investment  Perpetual Existence  Employee Benefits  Tax Advantages

Corporations  C-Corp.  Disadvantages  Expensive to Set Up - $500-$2500  Income More Heavily Taxed  Double Taxation  Business pays taxes on profits  Stockholders pay taxes on dividends received from those earnings

Corporations  Subchapter S Corp.  Avoids Double Taxation  Taxed Like a Partnership  No more than 75 Stockholders  Must be US Citizens  Nonprofit Corp.  Makes $ for Reasons Other than Owner's Profit…Profit Must Remain within Company  Limited Liability Company (LLC)  Owner’s Liability is Limited and No Double Taxation