Sole Proprietorship-a business that is owned and operated by one person *

Sole Proprietorship Advantages -easy to create -inexpensive to create -owner has complete authority over all business activities -owner receives all profits -business itself pays no taxes because it's not separate from the owner -income from business is taxed at the personal rate of owner Disadvantages -owner incurs any losses and is liable for the debts of the business -debts may have to be paid from the owner's personal assets -owner's home, car, and bank account may be at risk -it may be more difficult to raise capital -owner may not have enough assets to qualify for a loan or to satisfy investor requirements -sole proprietorship may be limited by its total reliance on the abilities and skills of the owner -death of owner automatically dissolves business unless there's a will to the contrary

Partnership- unincorporated business with two or more owners *

Partnership Advantages -partnership can draw on the skills, knowledge, and financial resources of more than one person -when seeking loans, this is an advantage -inexpensive to create -general partners have complete control -ideas can be shared -secure investment capital can be shared more easily and in greater amounts Disadvantages -it's difficult to dissolve one partner's interest in the business without dissolving the partnership -likely to survive only when specific provisions have been placed in the partnership agreement -most partnerships end because of personality conflicts -problems often start as disagreements over authority -partners can be held liable for each other's actions -if one partner signs a contract, the other partner is bound by the terms of the contract -the business may be sued for breach of contract

Corporation-a business that is registered by a state and operates apart from its owners *

Corporation Advantages -can conduct any type of business transaction -limited liability: shareholders are liable only up to the amount of their individual investment -ability to raise investment money -perpetual existence: if a shareholder leaves, there is no risk of liquidation -employee benefits -tax advantages -corporate status can help business get loans -corporation can raise money by issuing stock Disadvantages -expensive to set up -can cost between $500 and $2,500 -income is more heavily taxed -subject to double taxation on its earnings -corporation pays taxes on profits -stockholders pay taxes on dividends they receive from those earnings