Forms of Business Ownership Sole Proprietorship l l

Forms of Business Ownership

Sole Proprietorship l l A business owned exclusively by one person Advantages: – – – Easy to organize Few legal requirements Owner has complete control of the business

Sole Proprietorship l Disadvantages: – – Can be difficult to raise money Owner is personally responsible for all debt

Partnership l l A business owned by two or more people Advantages: – – – Easy to start More sources of capital (money) Share decision-making

Partnership l Disadvantages: – – – l Profits must be shared Partners share the debt of the business Any one of the partners can create a binding agreement for the business A partnership agreement is recommended to clearly state the responsibilities of each partner

Corporation l A separate legal entity formed by documents files with a state. It is owned by one or more shareholders and managed by a board of directors. Most corporations have several owners who invest in the business by purchasing shares of stock.

Corporation l Advantages: – – – If the business fails, its debts cannot be collected from the owners Issuing stock can create revenue Decisions made by a Board of Directors

Corporation l Disadvantages – – – More complicated and expensive to set up the business Subject to more government regulations than sole proprietorships or partnerships Profits taxed twice: Corporation pays taxes on income, and shareholders pay taxes on dividends.

Forms of Ownership Among U. S. Businesses Form of Ownership Total Revenue Percent of All Businesses Percent of Total Revenue Proprietorship $ 1, 029, 691, 760 72% 5% Corporation 19, 749, 426, 052 20% 85% Partnership 2, 582, 060, 669 8% 11%

Other Forms of Ownership l l A Limited Liability Partnership identifies some investors who cannot lose more than the amount of their investment. A Joint Venture is a unique business organized by two or more other businesses to operate for a limited time and for a specific project.

Other Forms of Ownership l l l An S-Corporation offers the limited liability of a corporation for a small business, and income is only taxed once. A Limited Liability Company (LLC) provides liability protection for owners, and is simpler to organize than a corporation. A Nonprofit Corporation is a group of people who join to do some activity that benefits the public.

Other Forms of Ownership l l A Cooperative is owned by members, serves their needs, and is managed by their interest. A Franchise is a written contract granting permission to operate a business to sell products and services in a set way.