There are three major forms of business sole proprietorship, partnership and corporation.
Sole Proprietorship – the most common form, a business owned or managed by one person.
- ease of starting: usually need a permit or license
- being your own boss
- pride of ownership
- leaving a legacy
- retention of company profits
- no special taxes
- liability: the risk of personal loss
- financial resources: what money do you bring to the business
- management difficulties
- time commitment
- limited growth
Partnership – two or more people legally agree to become co-owners of a business. There are three main types of partnerships, general, limited and master limited.
- General: all owners share in operating the business and assuming all liability and debt.
- Limited: an owner who is really only an investor an has no management responsibility or liability.
- Master Limited: much like a corporation, traded on the stock exchange but avoids the corporate income tax.
Corporation – a legal identity that can act an have liability apart from its owners. Many people assume that a corporation must be a large company, this way of thinking is false.
- limited liability
- raise more money from investors
- perpetual life: due to the fact they are a separate entity from their owners
- ease of ownership change
- separation of ownership and management: able to raise money from investors and stockholders without getting them involved with management.
- initial cost
- extensive paperwork
- double taxation: corporate income tax is taxed twice
- two tax returns: an individual who incorporates must file both a corporate tax return and an individual tax return.
- difficulty of termination
- possible conflict with stake holders