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Types of Business Ownership

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Presentation on theme: "Types of Business Ownership"— Presentation transcript:

1 Types of Business Ownership
Sole Proprietorship Corporation Partnership

2 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.)

3 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

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

5 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

6 Types of Partnerships General partnerships Limited partnerships
Joint venture Strategic alliance

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

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

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

10 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

11 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

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

13 Types of Corporations C-Corporation Subchapter S Corporation
Nonprofit Corporation

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

15 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

16 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

17 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

18 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


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