Types of Business Ownership

1
Types of Business Ownership
Sole Proprietorship
Corporation
Partnership
2
Sole Proprietorship

• 76 in U.S.
• One owner
• Totally responsible for liability
• Easy to start

• What is liability?
• Money owed to others (bills, e.g.)

3
Sole Proprietorship (cont)

• Disadvantages
• Unlimited liability
• More difficult to raise capital
• All resources rely on the one owner
• Death results in business dissolution

• Advantages
• Easy to create
• Inexpensive to create
• Owner gets all profits
• Least regulated
• Lower tax rate

4
Starting A Sole Proprietorship

• Decide on business name
• DBA (Doing Business As)
• Business License
• EIN (Employer Identification Number) for tax
  purposes

5
What is a Partnership?

• Simply put
• A partnership is a sole proprietorship with more
  than one owner

6
Types of Partnerships

• General partnerships
• Limited partnerships
• Joint venture
• Strategic alliance

7
General Partnerships

• All have unlimited liability
• All take full responsibility
• Law requires at least one general partner

8
Limited Partnerships

• Liability limited to amount of investment
• Not actively involved in business, or lose
  limited liability status

9
Joint Venture

• Companies join to complete specific project
• Limited to specific period of time
• Example
• Real estate developer with financial
  institution

10
Strategic Alliance

• Two businesses work together for mutual benefit.
• Example
• Manufacturer agrees to produce your product
  you dont have to build a plant the
  manufacturer always has your business

11
Is a partnership right for you?

• Advantages
• Inexpensive to create
• General partners have complete control
• Ability to share ideas
• Easy to secure capital

• Disadvantages
• Business ends if one partner leaves or dies
• Personality conflicts
• Each partner held liable for actions of the other

12
Corporation

• Business that is chartered, or registered, by a
  state.

13
Types of Corporations

• C-Corporation
• Subchapter S Corporation
• Nonprofit Corporation

14
C-Corporation

• Most common form of corporation
• Issuance of stock for ownership
• Board of Directors to make policy decisions and
  to select officers

15
Should you incorporate?

• Advantages
• Easy to raise capital
• Liability limited to amount of investment
• More status
• Pension and retirement funds
• Profit-sharing for employees

• Disadvantages
• Expensive to set up
• More heavily taxed
• Stockholders (investors) must pay taxes on
  dividends

16
Subchapter S Corporation

• Taxed like a sole proprietorship or partnership
• Works best with cash businesses good cash flow
• Must show enough taxable profit to cover taxes

17
Nonprofit Corporation

• Legal entities that make money for reasons other
  than the owners profit.
• Profit can be made, but
• Profits must remain within the company
• Examples
• Salvation Army Thrift Store
• Churches
• Company-sponsored run/walks for charity
• Boy Scouts/Girl Scouts of America

18
Limited Liability Companies (LLCs)

• Limited liability of corporation
• Taxed like a partnership
• Popular with foreign investors and family-owned
  businesses.
• Check with your state for requirements