Business Structures and Their Characteristics

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What is a Sole Proprietorship?

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A business owned by one person, where the owner is in charge of all day-to-day aspects of the business.

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What are the advantages of a Sole Proprietorship?

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1. Work independently without needing others' opinions. 2. Keep all profits. 3. Own the business for any duration and sell it anytime. 4. Income taxed as personal income. 5. Can discontinue the business anytime.

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What are the disadvantages of a Sole Proprietorship?

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1. All hard decisions fall on the owner. 2. Owner is responsible for all debts and liabilities. 3. Liability means being legally responsible. 4. Can be hard to get high-quality employees.

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What is a Partnership?

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A business operated by two or more people as co-owners, sharing all profits and usually having a legal agreement on business operations.

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What are the advantages of a Partnership?

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1. Two people working together. 2. Combined abilities and skills. 3. Easy to establish. 4. Legal agreement recommended. 5. Easy to start up. 6. Shared decision-making and management. 7. Taxed like a sole proprietor.

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What is the importance of a legal document in a Partnership?

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It outlines each partner's rights and responsibilities, capital investment, profit distribution, partner changes, and asset division if discontinued.

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What are the disadvantages of a Partnership?

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1. Income must be split. 2. Requires thorough planning before starting. 3. Responsible for both partners' debts.

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What is a Corporation?

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A business with many owners (shareholders) that does not dissolve when ownership changes. Shareholders elect a board to make decisions.

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What are the advantages of a Corporation?

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1. Easier startup with many owners and assets. 2. Can sell shares to raise capital. 3. Corporations usually don't dissolve. 4. Owners aren't responsible for business debts.

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What are the disadvantages of a Corporation?

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1. Requires significant time, money, and people to start. 2. High overhead costs due to many employees. 3. Taxed twice a year and pay stock tax. 4. Closely monitored by the government.