Sole ProprietorshipThis is a business run by one individual for his or her own benefit. It is the simplest form of business organization. Proprietorships have no existence apart from the owners. The liabilities associated with the business are the personal liabilities of the owner, and the business terminates upon the proprietor's death. The proprietor undertakes the risks of the business to the extent of his/her assets, whether used in the business or personally owned. Show
Single proprietors include professional people, service providers, and retailers who are "in business for themselves." Although a sole proprietorship is not a separate legal entity from its owner, it is a separate entity for accounting purposes. Financial activities of the business (e.g., receipt of fees) are maintained separately from the person's personal financial activities (e.g., house payment). Partnerships-General and LimitedA general partnership is an agreement, expressed or implied, between two or more persons who join together to carry on a business venture for profit. Each partner contributes money, property, labor, or skill; each shares in the profits and losses of the business; and each has unlimited personal liability for the debts of the business. Limited partnerships limit the personal liability of individual partners for the debts of the business according to the amount they have invested. Partners must file a certificate of limited partnership with state authorities. Limited Liability Company (LLC)An LLC is a hybrid between a partnership and a corporation. Members of an LLC have operational flexibility and income benefits similar to a partnership but also have limited liability exposure. While this seems very similar to a limited partnership, there are significant legal and statutory differences. Consultation with an attorney to determine the best entity is recommended. CorporationA corporation is a legal entity, operating under state law, whose scope of activity and name are restricted by its charter. Articles of incorporation must be filed with the state to establish a corporation. Stockholders' are protected from liability and those stockholders who are also employees may be able to take advantage of some tax-free benefits, such as health insurance. There is double taxation with a C corporation, first through taxes on profits and second on taxes on stockholder dividends (as capital gains). Small Business Corporation (S-Corporation)Subchapter S-corporations are special closed corporations (limits exist on the number of members) created to provide small corporations with a tax advantage, if IRS Code requirements are met. Corporate taxes are waived and reported by the owners on their individual federal income tax returns, avoiding the "double taxation" of regular corporations. Advantages/DisadvantagesSole Proprietorship
Partnership
Limited Liability Company
Corporation/S-Corporation
What type of business organization has two or more owners who share risks and profits?Partnerships-General and Limited
A general partnership is an agreement, expressed or implied, between two or more persons who join together to carry on a business venture for profit.
Which business organization has two or more owners?Partnerships are the simplest structure for two or more people to own a business together. There are two common kinds of partnerships: limited partnerships (LP) and limited liability partnerships (LLP).
Which form of business ownership have the most risk?Sole proprietorships
As a sole proprietor, you own the business and are responsible for any debts and other obligations. Although they're relatively simple, sole proprietorships tend to expose business owners to higher risk than other types of business ownership.
What type of business has two or more owners who share in the operation of the firm and are financially responsible for its debts?A partnership is an arrangement between two or more people to oversee business operations and share its profits and liabilities. In a general partnership company, all members share both profits and liabilities.
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