Alexander Sanchez-Reyes

Sole Proprietorship  A sole proprietorship is a business entity owned and managed by one person.  Advantages of sole proprietorships include: Having little government regulations, easy management, complete control over business decisions, and the business is not taxed separately from the owner.  Disadvantages include: The owner has unlimited liability, meaning that both personal and business assets of the owner are subject to claims of creditors.

Advantages of Sole Proprietorship  Sole proprietorships have little government regulations  They are easy to manage, and owner has complete control over business decisions.  The business is not taxed separately from the owner (no double taxation).  Startup costs for a sole proprietorship are minimal.

Disadvantages of Sole Proprietorship  The owner has unlimited liability, meaning that both personal and business assets of the owner are subject to claims of creditors.  Sole proprietorships usually terminate when the owner becomes disabled, retires, or dies.  It is difficult to raise capital in a sole proprietorship

Partnership  A partnership is a business with more than one owner that has not filed papers to become a corporation or a limited liability company (LLC)  It is also the simplest and least expensive co- owned business to create and maintain.

Advantages of Partnerships  No paperwork is needed to establish an ordinary partnership. A simple agreement will suffice.  Startup costs are generally shared making it financially easier on the partners.  Because a partnership is not a separate tax entity from its owners, the business profits are not taxed. Each owner is taxed for their share of profits on their individual income tax return.

Disadvantages for Partnerships  When a partner wants to leave the company, the partnership usually dissolves. The partners must fulfill remaining business obligations, pay off all debts, and divide assets and profits among themselves  Partners must come to a consensus when making business decisions. Some partners may become difficult to work with.

Joint Venture Partnerships  Joint venture partnerships combine the resources and skills of separate companies for a complex project.  Joint venture partnerships are not permanent.

Corporations  A corporation is a legal entity or structure owned by one or more shareholders.  S Corporations which are governed by sub chapter s of internal revenue code allow earnings and taxes to be treated at the individual owner’s level. – no double taxation

Advantages of Corporations  A corporation is considered a separate entity therefore shareholders have limited liability that keep their personal assets risk free from satisfying a corporation’s debts.  Built-in stock structures of corporations make it attractive to investors and talented employees.  Corporations will last longer. Usually until shareholders decide to dissolve the corporation or if it merges with another business.

Disadvantages of Corporations  Proper corporate formalities that must be followed make it a tedious process to receive the benefits of being a corporation.  Corporations are subject to more government regulations.  Double taxation occurs in corporations. They are taxed once for profits and again when dividends are paid to shareholders.

Franchise  A form of business where a person purchases or leases the right to sell a particular product.  Advantages: Individuals do not have to worry about expensive advertising expenses and the reputation of the company. Training and support to run a franchise is also available.  Disadvantages: Buying into a franchise can be expensive with initial costs of $50,000 or more. There is limited growth potential and many government regulations.

LLC (limited liability company)  A limited liability company is a form of business that avoids double taxation.  They provide management flexibility and the benefit of pass-through taxation.

Nonprofit Corporations  Nonprofit corporations are created for charitable or educational purposes.  Earnings from these type of corporations are used for expenses and expansionary purposes.

Cooperative  Cooperatives are created when two or more people or firms come together to share resources.  They are owned by the people who use them and invest in them.  Cooperatives are not always creates for monetary purposes. Members ensure that the cooperative business provides quality products and services at minimal costs.