1. Types of Business Ownership
Sole Proprietorship
Partnership
Corporation
Limited Liability Company
Types of Business Ownership

2. Sole Proprietorship Owned and operated by one person or family
Owner receives all profits
Owner incurs any losses and is liable for the debts of the business

3. Sole Proprietorship Advantages Disadvantages Easy to create
Owner receives all profits
Least regulated form of business
Business does not pay taxes
Taxes included in owner’s personal income tax
Personal taxes are at lower rates than corporate taxes.
Unlimited liability
Full responsibility for all debts
Owner’s personal assets are at risk
Requires owner to be knowledgeable in all aspects of the business
Business dissolves upon the death of the owner
Sole Proprietorship

4. Partnership Two or more owners
Ownership may or may not be divided equally
Partnership agreement defines partners’ interests in the business

5. Partnership Advantages Disadvantages Easy to create
Easier to acquire start-up capital (shared expenses)
Share ideas, skills, and financial obligations
Owners pay taxes as personal income tax
Difficult to dissolve partnerships
Potential for personality conflicts / disagreements in business decisions
Partners are liable for each others’ actions
Partnership

6. Corporation Registered by the state Operates apart from its owners
Unlimited life
Does not dissolve upon owner’s death
Represented by shares of public and private stock

7. Corporation Advantages Disadvantages Separate legal entity from owners
Perpetual existence
Liability is limited to the amount invested by the shareholder
Note: Officers may be personally liable. Consider Enron’s late Kenneth Lay.
Expensive to start up
Requires extensive legal paperwork; need attorneys
Owners are seemingly double- taxed
Business profits taxed at a higher corporate rate
Owner’s income from the business are taxed as personal income
Corporation

8. Limited Liability Company (LLC)
Relatively new form of ownership
Hybrid of a partnership and a corporation
Characteristics include:
Owners are shielded from personal liability
Profits and losses pass directly to the owners without taxation of the company itself

9. Be a Business Owner