Foundations of Business - Chapter 4: Choosing a Form of Business Ownership

Ease of Start-up: Partnerships are relatively easy to form.
Availability of Capital and Credit:
- Partners can pool their funds, resulting in more capital being available than in a sole proprietorship.
Personal Interest:
- General partners have a vested interest in the operation of the firm.
Combined Business Skills and Knowledge:
- Partners often have complementary skills that offset each other's weaknesses.
Retention of Profits:
- All profits belong to the owners of the partnership.
No Special Taxes:
- A partnership pays no income tax; however, the IRS requires them to file an annual information return.

Unlimited Liability: Each general partner is legally and personally responsible for the debts, taxes, and actions of other partners.
Management Disagreements: Tensions can arise due to differing opinions among partners.
Lack of Continuity: Partnerships can be terminated if a general partner withdraws, is declared incompetent, or dies.
Frozen Investment: Although it’s easy to invest in a partnership, withdrawing funds can be difficult.

Incorporation:
- Businesses can incorporate in any state they choose, typically determined by cost and state laws.
Domestic Corporation: A corporation in the state in which it is incorporated.
Foreign Corporation: Any corporation doing business in a state other than where it is incorporated.
Alien Corporation: A corporation chartered by a foreign government conducting business in the United States.
Articles of Incorporation: A contract between a corporation and the state that recognizes the formation of the corporation. It includes:
- The firm’s name and address.
- The incorporators’ names and addresses.
- The purpose of the corporation.
- The maximum amount and types of stock to be issued.
- The duration of the corporation.
- The name and address of the registered agent.

S Corporation: Taxed as a partnership; limited to 100 stockholders meeting specific criteria.
Advantages: Avoids double taxation while retaining limited liability.

LLC: Combines benefits of a corporation and partnership, avoiding certain restrictions.
Advantages: Avoids double taxation, limited liability, more management flexibility with fewer restrictions.

Not-for-Profit Corporation: Organized for purposes beyond profit (social, educational, etc.).
Examples include museums and charitable organizations ensuring limited liability.