Three Types Of Business: Sole Proprietorships, Partnerships, And Corporations

1044 Words 4 Pages
There are many choices that must be made when setting up a business but the most important question is what type of business it will be. In today’s business world there are three types of businesses sole proprietorships, partnerships, and corporations. In this paper each type of business will be explained in detail by describing advantages, disadvantages, and examples of each type of business.
The first form of business is the sole proprietorship. A sole proprietorship is a business that is owned and operated by one person. Sole proprietorships make up 72% of all businesses yet account for only 5% of sales (Remy, 2008). A sole proprietorship is very easy to start and operate. To start a sole proprietorship all you need is an idea, money, and
…show more content…
A corporation is a business that is legally recognized (Remy, 2008). Corporations are given the rights and responsibilities of a person. Corporations can own property, sue, be sued, and pay taxes (Remy, 2008). A corporation is formed when someone gets a charter. A charter is a document of government consent that gives permission to create a corporation (Remy, 2008). It also lists the parameters of the business. The corporation then allows stockholders to buy stock which is legally considered to be partial ownership of the corporation (Remy, 2008). The corporation shares losses and gains with the stock holders. The corporation is run by a board of directors that makes decisions for the business (Remy, 2008). Corporations have many advantages. The first is the ease of raising capital. By selling stock the business raises capital increasing income. Another advantage is the sharing of the losses accrued by a business. If a business goes into debt stockholders must pay because they purchased a portion of the company. The disadvantages of a corporation are the expense and cost of setting up a corporation. The process can take weeks if not years to complete. Another difficulty for corporations is the relative inability of owners to make decisions as there are so many owners (Remy, 2008). Successful corporations are actually quite common. An example of which would be Walmart. While the company started as a sole proprietorship to earn …show more content…
There are multiple reasons for this. First is that there is minimum loss to the original owner if the business fails due to the sharing of stock. Another reason is the way in which corporations are able to earn money by selling stock. Despite the cost and time associated with getting a charter once set up a corporation can easily share responsibilities of the owner with other members of the board of directors. The creation of a corporation leads to decreased responsibility of the owner and easier management once a business once operating. For these reasons a corporation is the best form of

Related Documents