Forms of Business Ownership It’s just paper. All I own is a pickup truck and a little Walmart stock. ………………………………..Sam Walton

Sole Proprietorship A business owned and managed by one individual; the business and the owner are one and the same in the eyes of the law

Sole Proprietorship Advantages Simple to create Least costly form Profit incentive Total decision-making No special legal restrictions Easy to discontinue

Sole Proprietorship Disadvantages Unlimited personal liability Limited skills and abilities Feelings of isolation Limited access to capital Lack of continuity of business

Partnership An association of two or more people who co-own a business for the purpose of making a profit A partnership agreement or the Uniform Partnership Act

Partnership Advantages Easy to establish Complementary skills Division of profits Larger pool of capital Ability to attract limited partners Little governmental regulation Flexibility Taxation

Partnership Disadvantages Unlimited liability of at least one Difficulty in disposing of interest Lack of continuity Potential for personality and authority conflicts Partners bound by law of agency

Special Partnerships Limited partnership-composed of at least one general partner and at least one limited partner Limited liability partnership-a special type of limited partnership, in which all partners are limited partners Master limited partnership-a partnership whose shares are traded on stock exchanges, just like corporations

Corporations A separate legal entity apart from its owners which receives the right to exist from the state in which it is incorporated Domestic Foreign Alien Publicly held Closely held

Corporations Certificate of Incorporation Name Statement of purpose Time horizon Names and addresses of incorporators Place of business Capital stock authorization’ Capital required at time of incorporation Provisions for preemptive rights Restrictions on transfering shares Names and addresses of officers By-laws

Corporations Advantages Limited liability of stockholders Ability to attract capital Ability to continue indefinitely Transferable ownership

Corporations Disadvantages Cost and time in incorporating Double taxation Potential for diminished incentives Legal requirements and red tape Potential loss of control

Limited Liability Company A relatively new form of ownership that, like an S corporation, is a cross between a partnership and a corporation; it is not subject to many of the restrictions imposed on S corporations; only 2 of the following: Limited liability Continuity of life Free transferability of interest Centralized management

Limited Liability Corporation Articles of organization-name and address, method of management, duration, names and addresses of each organizer Operating agreement-no more than 2 of: limited liability, continuity of life, free transferability of interest, centralized management

Limited Liability Corporation Limited personal liability No limit on number of shareholders No ban on nonresident alien No restriction on a member’s ability to manage the company Avoids double taxation Flexibility to divide income as owners see fit Not subject to self-employment tax except for managing member

Professional Corporation-lawyers, accountants, doctors, dentists, etc. Joint Venture-partnership formed for a specific purpose