Sole Proprietorship

Description

Two Advantages

Two Disadvantages

Liability

Business own by one person and no distinction is made between said person and the business.
­All profit belongs to business owner
­easy and inexpensive to create
­unlimited personal liability
­hard to raise money relies solely on owner as no distinction is made between the owner and the business

Income taxes

­you and your business have combined taxes.
Business owner reports all gains and loses.
The business income is your income.

Continuity of the organization

­The owner has the right to pass the business to another person through inheritance. If no will is set in place the business will disperse.

Control

­Because you are the sole owner of the business, you have complete control over all decisions. Profit retention

­The owner has complete access to all profits made from the business. The owner can take a vacation with money from the business and even write checks from the business for personal reasons.

General Partnership

Description

Two people are in charge of the business, usually formed through a contract or oral agreement. The state is still not involved in

the business. Each partner contributes to all aspects of the business, including money, property, labor or skill. In return, each partner shares in the profits and losses of the business. Two Advantages

Two Disadvantages

­Partnerships are generally an inexpensive and easily formed business structure.
­Shared financial commitment
­disagreements among partners
­shared profit

Liability

The partners are responsible for all debt or finances for the business. If the business has debt it can be taken out of their personal finances. The owners and the business are as one unit.

Income taxes

A partnership must file an “annual information return” to report the income, deductions, gains and losses from the business’s operations, but the business itself does not pay income tax.

Continuity of the organization

If a partner dies or retires the remaining partner will then have sole ownership of the company. The partner can also will his share of the company or sale.

Control

Both partners share control over the business

Profit retention

Same as the sole proprietor except split between partners.

Limited partnership

Description

A limited partnership is a partnership that has both limited and general partners.

Two Advantages

­less liability for the limited partner
­The general partners hold most of the power and control
­
­

Two Disadvantages

Liability

Income taxes

Continuity of the organization

does not have control over any aspect of the business the general partners must carry the burden of all the business’s debts and obligations while the limited partner does not have the liability or responsibility of debt

A limited partner’s liability for the partnership’s debt is limited to percent he or she has invested. Their personal finances cannot be garnished to pay debt for the business. The general partner has full responsibility and therefore personal wages and business are not separate and any money or property contributed becomes an asset of all the partners.
As with a general partnership, the profits and losses in a limited partnership flow through the business to the partners, all of whom are taxed on their personal income tax returns.
The difference is that the limited partners in the relationship get to share in the profits and losses, but they do not have to participate in the business itself.

Most state laws provide that a limited partner may assign his interest in the firm to someone else without affecting the dissolution of the partnership. Control

Limited partnerships are managed and controlled by general partners; general partners have authority to bind the partnership. Limited partners normally do not participate in managing the business. equal shared of the profits regardless of amount of investment.
All profits go to the

Profit retention

partners and are taxed once depending on the tax rate of each partner.

C­Corporation
Description

Two Advantages

Two Disadvantages

a company that is taxed separately from it owner limited liability unlimited growth potential
­profits are taxed when earned and taxed again when distributed as shareholders' dividends ­shareholders in a C Corporation also can't deduct any corporate losses
Limited liability for directors, officers,

Liability

shareholders, and employees C corporations are subject to double taxation.

Income taxes

Shareholders are only allowed to issue dividends after paying taxes.

Shareholders of a C corporation are required to claim income received as dividends on their personal income tax return.

Continuity of the organization

the company continues to run as it w even after a death or retirement

Control

The board of directors who are shareholders have a large stake in the corporation. They make most of the decisions because they own most of the company. They control the day to day operations. They are called board of directors. Sha reholders can vote for important changes. The operational control goes to the board of directions. The shareholders have operational oversight to monitor and improve company processes.

Profit retention

all profits and losses goes to the shareholders

S­Corporation

Description

Two Advantages

Two Disadvantages

Liability

A corporation where the shareholders elect to not be taxed but to split up the losses between shareholders, They do not pay any federal taxes protects assets pass through taxation
To operate as an S corporation, it is necessary to first incorporate the business by filing
Articles of Incorporation with your desired state of incorporation
Can only file as one class of stock falls on shareholders

Income taxes

The shareholders must then report the income or loss on their own individual income tax returns

Continuity of the organization

if someone dies or retires the corporation continues on normally.

Control

Profit retention

Shareholders elect directors. Shareholders do not, other than through the election of directors, typically exercise any control over the overall plans, goals, or day­to­day operations of the corporation. Directors are responsible for the management and exercise the rights and power of the corporation. Directors elect officers such as president, vice president, treasurer and secretary to carry out the policies of the board and to run the corporation on a day­to­day basis.

all profits pass through shareholders

Limited Liability Company

Description

Two Advantages

Two Disadvantages

Liability

a business structure that combines the pass­through taxation of a partnership or sole proprietorship with the limited liability of a corporation ­freedom in management
­less liability than a corporation
­higher fees
­have to follow government regulation only liable for the investment of the business.
IF the company gets sued personal assets cannot be touched only investments in the business Income taxes

Continuity of the organization

Control

Profit retention

owners report business income and losses on personal tax returns similarly to sole proprietor or partnership
With respect to limited liability companies
(LLCs), upon any member’s death, retirement, resignation, expulsion, bankruptcy, or dissolution, the LLC is usually dissolved unless the remaining members agree to continue the entity.

shareholders, or partners profit retention belongs to the shareholder and is split according to the amount of stock that shareholder owns.