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What are the 3 forms of business ownership?
sole proprietorship, partnership, corporation
What is a sole proprietorship?
A business owned and operated by one person
What is a Partnership?
A business owned and operated by 2 or more people
What is a corporation?
a company or group of people who act as a single person
This is a company that is owned by one person. It has unlimited liability and is very risky to start.
Sole Proprietorship
This business offers liability protection for its owners; also, it is considered an independent entity.
Corporation
What are advantages of having a sole proprietorship?
total control of business, easy startup, minimal capital needed, no business name needed, business expenses can be used to reduce taxable income
What are the advantages of having a partnership?
two or more people can contribute to the investments
added expertise to the business
good for people who share an idea for a business and work well together
What is an open corporation?
a corporation whose ownership shares are available for exchange on a public market
An advantage of owning this business is that you can decrease your competition and increase your goodwill.
Partnership
This type of business has unlimited life.
Corporation
What are disadvantages of having a sole proprietorship?
need to obtain required licenses and permits, limited capital and business skills, taxes will have to be paid on profits, all risk placed on owner
What are disadvantages of having a partnership?
no protection for personal assets in case of debt
each partner is responsible for decisions made by the other partner
each partner can lose more than the amount originally invested
if partner chooses to leave the partnership dies
What is a Subchapter (S) Corporation?
offers the limited liability of a corporation; all income is passed through to the owners based on their investment and is taxed on their individual tax returns
What is a board of directors?
a recognized group of people who jointly oversee the activities of an organization
What is taxable income?
amount of income used to calculate how much tax an individual or a company owes to the government in a given tax year
What do you need to do before starting a Sole Proprietorship?
decide on name
obtain a business license
EIN (employer identification number) for tax purposes
Why is it important to fill out a partnership agreement?
it will outline issues such as how the profits or losses will be divided among the partners, and it will describe any limits to the legal responsibility of the partners
What is a Limited Liability Corporation (LLC)?
a combination of a partnership and corporation; provides liability protection for owners
What is a joint venture?
a unique business organized by two or more other businesses to operate for a specific time and for a specific project
This type of business allows you to combine capabilities and capital with at least one other person. It also allows all of the people in the business to share equally in the liability.
General Partnership
What is the percent of Sole Proprietorship businesses in the U.S.?
75% of businesses are Sole Proprietorships
What is a limited liability partnership?
a partnership where one or more owners have limited liability
difficult and costly to set up
What is the Articles of Incorporation?
a set of documents filed with a government body for the purpose of legally documenting the creation of a corporation
In this business structure, two or more people own the business; at least one person can limit their investment and limit their liability.
Limited Liability Partnership