Supplements

 Profit-making enterprises  Sole proprietorship:  Partnership:  Corporation:

 UNINCORPORATED business owned by one person.  Owner is manager  Accounting: viewed as a separate entity  Taxes: not separate from owner

 UNINCORPORATED business owned by TWO or more persons knows as PARTNERS.  Usually created by partnership agreement (how to divide income and how to distribute net assets upon dissolution).  Legally, each partner in a general partnership is responsible for the debts of the partnership.  Accounting: Considered a separate entity  Taxes: More complex, but flows to partners tax returns.  Other types of partnerships: Limited partnerships

 Incorporated under state regulations and laws.  Owners are called SHAREHOLDERS or STOCKHOLDERS.  Owners own shares of stock in the company  ACCOUNTING: Separate entity  Taxes: Separate entity -- corporate tax  Board of Directors -- Oversight

 Dominant form of business in the US (by size)  Advantages of Corporate form:  Limited liability of owners  Continuity of life  Ease of transferring ownership (sale of stock)  Opportunity to raise large amounts of capital (cash) from large numbers of people.  Disadvantages of Corporate form:  Double taxation