The Sole proprietorship : owned by 1 person



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Types of Business Handout

The Sole proprietorship : owned by 1 person

ADVANTAGES


DISADVANTAGES

*simple to start the business

and easy to dissolve it;
*own all profit
*be your own boss
*make management decisions alone
*pay tax only on personal income

*unlimited liability : owner is responsible for claims against the firm that go beyond the value of the owners’ ownership in the firm.(car,house...)


*difficulty raising funds for expansion
*often have no one to share the management burden
*suffer from impermanence of the firm

The Partnership : an association of two or more persons to carry on as co-owners of a business for profit.

Partnership Agreement : oral or written contracts between partners.

ADVANTAGES


DISADVANTAGES

*start business with little difficulty


*pool their funds and borrowing power
*have more chance to specialize in running the business
*no tax on profits of business,only on personal incomes

*unlimited liability(option of limited liability)


*potential for personal disagreement
*impermanence of the firm
*the freezing of each partner’s investment in the business

The corporation : a legally chartered organization that is separate and legal entity apart from its owners.



ADVANTAGES


DISADVANTAGES

*exists as a separate legal entity


*limited liability for its owners
*enjoys long life
*transfers ownership easily
*has more financial capacity

*special&double taxation


*complex & costly formation and dissolution
*considerable government regulations and public requirements

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