Types of Business Ownership Sole Proprietorship Corporation Partnership

Sole Proprietorship What is liability? 76% in U.S. One owner Totally responsible for liability Easy to start What is liability? Money owed to others (bills, e.g.)

Sole Proprietorship (con’t) Disadvantages Unlimited liability More difficult to raise capital All resources rely on the one owner Death results in business dissolution Advantages Easy to create Inexpensive to create Owner gets all profits Least regulated Lower tax rate

Starting A Sole Proprietorship Decide on business name DBA (“Doing Business As”) Business License EIN (Employer Identification Number) for tax purposes

A partnership is a sole proprietorship with more than one owner What is a Partnership? Simply put: A partnership is a sole proprietorship with more than one owner

Types of Partnerships General partnerships Limited partnerships Joint venture Strategic alliance

General Partnerships All have unlimited liability All take full responsibility Law requires at least one general partner

Limited Partnerships Liability limited to amount of investment Not actively involved in business, or lose limited liability status

Joint Venture Companies join to complete specific project Limited to specific period of time Example: Real estate developer with financial institution

Strategic Alliance Two businesses work together for mutual benefit. Example: Manufacturer agrees to produce your product – you don’t have to build a plant; the manufacturer always has your business

Is a partnership right for you? Advantages Inexpensive to create General partners have complete control Ability to share ideas Easy to secure capital Disadvantages Business ends if one partner leaves or dies Personality conflicts Each partner held liable for actions of the other

Business that is chartered, or registered, by a state. Corporation Business that is chartered, or registered, by a state.

Types of Corporations C-Corporation Subchapter S Corporation Nonprofit Corporation

C-Corporation Most common form of corporation Issuance of stock for ownership Board of Directors to make policy decisions and to select officers

Should you incorporate? Advantages Easy to raise capital Liability limited to amount of investment More status Pension and retirement funds Profit-sharing for employees Disadvantages Expensive to set up More heavily taxed Stockholders (investors) must pay taxes on dividends

Subchapter S Corporation Taxed like a sole proprietorship or partnership Works best with cash businesses – good cash flow Must show enough taxable profit to cover taxes

Nonprofit Corporation Legal entities that make money for reasons other than the owners’ profit. Profit can be made, but… Profits must remain within the company Examples: Salvation Army Thrift Store Churches Company-sponsored run/walks for charity Boy Scouts/Girl Scouts of America

Limited Liability Companies (LLC’s) Limited liability of corporation Taxed like a partnership Popular with foreign investors and family-owned businesses. Check with your state for requirements