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Major Business Formation Types: Pros & Cons

In: Business and Management

Submitted By 6off
Words 458
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There are four different major business formation types. First I will discuss the sole proprietor formation, then the general and limited partnership, the corporation formation and then the limited liability company. I will focus on the main advantages and disadvantages of the formations and decide which one would be best for a design firm.
A sole proprietorship is similar to a freelancer, in a sense that one person is the boss and has responsibility over everything. They are taxed similarly as well. One advantage is that the owner would receive all profits. On the other hand they are also responsible for all losses and debts.
There are two types of partnerships. You have a general partnership where each partner is responsible for everything, good or bad. Then you have a limited partnership where the limited partner is there for investment purposes only. Having a general partner would be great for splitting the workload and finishing projects at a faster rate. But if one partner is being sued the company and the other partner is at risk as well. In a limited partnership there is usually just one general partner and it could be numerous limited partners. Limited partners basically make investments in exchange for a share of the profits from the design firm. Limited partnerships allow the general partner to run the firm without any interference.
A corporation is a company or a group of people authorized to act as one. Corporations are separate legally from the people they are made up of. If the company gets sued the only assets that are liable are those of the company. With corporations there must be stockholders. Stockholders have voting rights; with these rights they can determine who the CEO of the company is. Which in turn could possibly affect management and the way you would want your firm to be run.
A limited liability company has characteristics of all...

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