Business Ownership

Corporation

Sole Proprietorship

Partnership

S Corporation

Owned & operated by one person

Accountant

Janitor

Salesperson

Manager

Types of Sole Proprietorships

Clothing boutique - Retailing

Corner grocery - Service

Small, independent farmers - Agriculture

Advantages

Easy to set-up and open a business

Ownership Pride

No attorney needed

Proud of his/her accomplishment

Credit for solving day-to-day issues

Profit

Strong incentive to succeed

Attractive incentive

Great satisfaction/idea

Tax Returns

Profits taxed as personal income of the owner

Own boss

Make every decision for the business

Make your own schedule

You are the superior authority

Disadvantages

Unlimited liability

Business owner is personally responsible for all the debts of the business

Lack of continuity

Owner's personal property could be taken and sold if necessary

If illness or death occurs to the owner, the business will cease

Unless it is a profitable enterprise

Unless his/her heirs will take over

Lack of $$$

Who will repay the loan if the owner passes away?

Limited ability to to borrow $$$

Limited Management Skills

May need to hire people to work for you

Employees

Managers

Accountants

Janitors

Association of two or more people to be co-owners of a business

10% of all American businesses

Types of Partners

General Partner

Person who has full/shared responsibility of the business operation

Unlimited liability of debts

Must give notice to creditors, customers, and suppliers once the partner withdraws from the business

Limited Partner

Person who invests money in the business with no management duties/responsibility or liability

Receives portion of profits and tax benefits

Articles of Partnership

Agreement stating the terms of the partnership

Written or oral

Advantages

Simple to start a partnership

Partners pool their funds

Disadvantages

Allows for more capital availability

Approve larger loans

Extend more credit

Operating a business with the help of another person = A strong motivating force

Pooled talents

One's weakness may be the other's strong suit

All profits belong to the owners

No income tax

Unlimited liability for the general partner

Each partner is responsible for debts, taxes, or actions incurred despite whose fault it was

One partner may do something that makes the other partner uncomfortable

Bringing a spouse or relative into the business

A partner wants wanting to withdraw more money from the business

Partnerships are terminated after a general partner passes away

Artificial person created by law, with most of the legal rights of a real person. Exists only on paper!

Right to start/operate a business

Right to purchase/sell property

Right to borrow $$$

Right to sue or be sued

Right to enter into binding contracts

This is where stocks and stockholders come into play

Closed Corporation: Stock is owned by few and not for sale to the public

Mars - M & M's, Milky Way, Snickers, etc.

Open Corporation: Where stock can be bought and sold by any individual

Apple

Microsoft

Sony

Your choice of becoming incorporated should be thought of after you see that corporation is the best business form for you

Domestic Corporation: Incorporated business in the state

All other states where it does business

Articles of Corporation

Established after a home state has been chosen

Contract/Corporate Charter

Corporate Structure

Board of Directors: Governing body elected by stockholders

Set Company goals

Develop general plans/strategies

Overall operation/appointing corporate officers

Corporate Officers

Help board make plans, hire, daily activities

President

Chairman of the Board

Secretary

Treasurer

Advantages

Disadvantages

Limited liability

Corporation's assets are what creditors claim in case of lawsuit or failure of corporation

Capital Raising

Raise additional sums of money by selling stock

Corporation exists like a person: independently

The corporation does not cease to operate after a withdrawal, death, or incompetence of an individual.

Specialized Management: Hire highly skilled, knowledgeable, and talented managers

Opportunity for advancement

Expensive and complex to start

Attorney is almost always necessary to fill out legal forms

Conflict within the Corporation

Stress to increase sales revenue

Stress to reduce expenses

Stress to increase profits

Lay-off employees

Reduce salary of employees

Double taxation

Corporate income

Personal income of stockholders

Can't keep operations confidential, which leads to competitors studying each others operations

Corporation in which the owners are taxed as partners in a partnership

Limited-Liability Company: Combination of corporation and partnership benefits without the restrictions and disadvantages of them.

Pass-through taxation

Limited liability

Management flexibility

BMW

Not-for Profit Corporations: Organized for social, educational, religious, or other service rather than to own a profit

Charities

Private schools

Colleges

Museums

Tax-exempt

Habitat for Humanity