Sole Proprietorship
Who owns the business in a Sole Proprietorship?
A single Individual.
Who owns the business in a Partnership
Owned by two or more individuals who share profits and losses.
Who owns the business in an LLC
Owners are called members, and there can be one or multiple members
Who owns the business in a Corporation
Owned by shareholders who elect a board of directors to oversee the company.
Who owns the business in a No-Profit
No one owns a 501 C(3)
Liability responsibilities of a Sole Proprietorship.
The owner has unlimited personal liability for business debts and obligations.
Who does the liability fall upon in a Partnership?
Partners have unlimited personal liability for business debts and obligations.
Who does the liability fall upon in an LLC?
Members have limited personal liability; their personal assets are protected from business debts.
Who does the liability fall upon in a Corporation
Shareholders have limited personal liability; their personal assets are typically protected.
Who does the liability fall upon in a No-Profit
Liability protection. The indemnification clause in a 501(c)(3)’s articles of incorporation protects board members of a nonprofit from personal liability around concepts like organizational debt.
Who or what is responsible for the taxes?
Business income is reported on the owner's personal tax return.
Who or what is responsible for the taxes in a Partnership?
Business income is typically passed through to partners and reported on their personal tax returns.
Who or what is responsible for the taxes in an LLC?
LLCs can choose to be taxed as a partnership or a corporation, providing flexibility in tax treatment.
Who or what is responsible for the taxes in a Corporation
Corporations are subject to double taxation, where the business is taxed on its profits, and shareholders are taxed on dividends.
Who or what is responsible for the taxes in a No-Profit
Federal and state tax exemption. Donors who give money to the organization may be able to deduct the donations on their tax returns. In addition, the organization itself is exempt from federal and state taxes.
Advantages of a Sole Proprietorship.
Simplicity, full control, and minimal regulatory requirements. Disadvantages: Limited access to capital, personal liability, and potential difficulty in transferring ownership.
Advantages of a Partnership.
Shared responsibilities, potentially more access to capital, and combined expertise.
Advantages of an LLC
Limited liability, flexibility in management, and pass-through taxation.
Advantages of a Corporation
Limited liability, easy transferability of ownership, and potential for raising capital through the sale of stock.
Advantages of a No-Profit
Member ownership, shared decision-making, and potential for collective benefits.
Disadvantages of a Sole Proprietorship
unlimited personal liability, making the owner personally responsible for all business debts and legal issues
Disadvantages of a Partnership.
Shared liability, potential for conflicts among partners, and limited transferability of ownership.
Disadvantages of an LLC
More paperwork and formalities compared to sole proprietorships and partnerships.
Disadvantages of a Corporation
Increased regulatory requirements, double taxation, and more complex management structure.
Disadvantages of a No-Profit
It's expensive and time consuming to start a 501 C(3), There are a lot of restrictions and regulations, Loss of control. Your nonprofit must adhere to your bylaws, the fiduciary duty of your board of directors, IRS and state requirements and donor intent. As such, the organization becomes an entity that goes beyond your personal interests.