The three types of business ownership are, Sole Proprietorship, Partnership and Corporation. Sole proprietorship is an organization owned and operated by a single person. Seventy two percent of organizations in the United States are structured this way making it the most common form of business entity (Hatten, 2012).
Some of the advantages of having a sole proprietorship are, they are easy to setup and the cost is minimal, having independence and the ability to do what you want to do, full control of your business, you can answer to the current market needs without going through partners or the board of directors, you can deduct losses from any other income you may have for the first two years of your business (Hatten, 2012).
Disadvantages …show more content…
You can also be liable for your partners if something happens. Having a partnership does not mean independence like in a sole proprietorship. If an individual decides to reinvest into the organization, the other partners must pay their share of income tax on their partners’ income. Another disadvantage is if a partner decides to leave the organization, the partnership is dissolved. One way to correct this is to have a buy-sell agreement which states what happens if partner leaves the company (Hatten, 2012).
To avoid some of these problems, a limited partnership was created. In a limited partnership, there must be one general partner who holds unlimited liability and all of the rest of the partners have a limited amount of liability.
An example of a company that operated as a partnership would be a family restaurant in where the restaurant is owned and operated by husband and wife. There is a family pizza restaurant approximately two miles away from me that run in a partnership fashion.
The last type of organization is a corporation which can be broken down to C corporation, S corporation and LLC (limited liability Company). A corporation is an entity that the most complicated of the three to start in that the law treats it as having legal rights of an individual which can sue or be sued (Hatten,
Some of the advantages of having a sole proprietorship are, they are easy to setup and the cost is minimal, having independence and the ability to do what you want to do, full control of your business, you can answer to the current market needs without going through partners or the board of directors, you can deduct losses from any other income you may have for the first two years of your business (Hatten, 2012).
Disadvantages …show more content…
You can also be liable for your partners if something happens. Having a partnership does not mean independence like in a sole proprietorship. If an individual decides to reinvest into the organization, the other partners must pay their share of income tax on their partners’ income. Another disadvantage is if a partner decides to leave the organization, the partnership is dissolved. One way to correct this is to have a buy-sell agreement which states what happens if partner leaves the company (Hatten, 2012).
To avoid some of these problems, a limited partnership was created. In a limited partnership, there must be one general partner who holds unlimited liability and all of the rest of the partners have a limited amount of liability.
An example of a company that operated as a partnership would be a family restaurant in where the restaurant is owned and operated by husband and wife. There is a family pizza restaurant approximately two miles away from me that run in a partnership fashion.
The last type of organization is a corporation which can be broken down to C corporation, S corporation and LLC (limited liability Company). A corporation is an entity that the most complicated of the three to start in that the law treats it as having legal rights of an individual which can sue or be sued (Hatten,