COMMON TYPES OF BUSINESS OWNERSHIP

Sole proprietorship

Occurs when someone does business activities but doesn’t register as another kind of business.

Sole proprietorship

There is no separate business entity, meaning there is no distinction between the business owner’s personal and professional assets and liabilities

Sole proprietorship

are simple, easy to start, and one of

the most common types of business ownership.

Little to mo restrictions

Low startup cost

No additional federal taxes

Sole proprietorship

Pros

All power is given to one person

Hard to raise money

Unlimited liability

Sole proprietorship

Cons

Partnership

simplest type of business ownership when two or more people are involved.

limited partnerships and limited

liability partnerships.

Two kinds of Partnership

Liability

being responsible for something by law

Limited liability

a person’s liability is limited to a fixed sum, which usually reflects their investment in the business

Unlimited liability

there is no limit to the liability and the

owners take full responsibility for the companies’ debts

limited partnership

has one partner with unlimited liability while everyone else involved has limited liability.

limited liability partnership

has only one class of owners, meaning there is no partner with the risk, and power, of unlimited liability.

limited liability partnership

shares the liability among the owners, protecting them from the mistakes of their partners

Benefits of teamwork

Low startup cost

Greater borrowing capacity

Partnership

Pros

Risk of disagreements

Divided profits

Potential unlimited liability

Partnership cons

do

not pay additional federal income taxes or those

associated with being a corporation.

Limited liability company

fall under the category of self- employment, so those taxes fall on them as well.

Limited liability company

is a good choice for a business owner willing to take a little bit of a bigger risk or one looking to protect their personal assets.

Limited liability company

Meaning if your business gets hit with a lawsuit or goes bankrupt, your house, car, and personal piggy bank are safe

Protected from liability

Easy startup

No additional federal taxes

Limited liability company

Pros

Higher startup

Self-employment taxes

Hard to raise outside capital

Limited liability company

Cons

C corporation

or just a regular corporation, is its own

entity kept separate from its owners

C corporation

This means they offer the most protection in terms of personal liability.

C corporation

Corporations have an advantage when it comes to funding: stock.

● A stock is a partial share in a company, so when people buy stock, they are essentially buying ownership and decision- making responsibilities.

C corporation

However, starting a corporation costs more than any other business structure.

● Not only are they legally required to do keep more records and release more reports, but they also pay income tax.

C corporation

In some cases, there is even double taxation - once on profits, and then again on the dividends distributed to stockholders

C corporation

With so many different stakeholders contributing to the same business, corporations become solid.

● If someone leaves, the business remains relatively unaffected.

C corporation

A corporation is a good structure for a business owner looking for a little more risk, good funding options, and the prospect of eventually “going public,” which means the company will eventually sell stock to the public.

Stock provides good funding stock

C Corporation

Pro

Double taxation: once om profits and once on dividens

C Corporation

Cons

S corporation

is a type of corporation that is meant to avoid the double taxation that hits normal C corporations.

S corporation

To become of ot and avoid that taxation, you file a special election. Once the business is officially a corp, it is no longer taxed on profits. Instead, all profits, and losses, are passed on to the stockholders.

S corporation

However, this is not possible everywhere. There are certain states that tax above a certain limit and some just tax them like a C corp.

S corporation

isn’t possible for everyone. If you

have more than 100 stakeholders and any stakeholders that aren’t citizens of the United States, you are out of luck

No double taxation

S corporation

Pros

Once you make a certain amount you will be doubled taxed

S corporation

Cons

Close corporations

Stockholders in it benefit from liability

protection while also being free of reporting requirements

and pressure from shareholders that don’t know much

about the busines

B corporation

Their stakeholders have the goal of providing a public

benefit, but they also want to see a profit.

B corporation

have missions similar to

non-profit organizations, but they are, in fact, a for-profit

corporation.

Close corporation

resembles the structure of a B corp. A

lot of the rules associated with smaller companies

Close corporation

With other types of corporations, anyone can own stock.

Close corporation

If there is stock available and they have the money, it’s

theirs.

Close corporation

This is where close corporations differ: the stocks are

owned by people that are closely related to the business.