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Business Entities - Coggle Diagram
Business Entities
Sole Proprietorship
Pros
Easy to start. No corporate formalities or paper work requirements. Deductable business losses on our personal tax return. Tax filing is easy.
Cons
Personally responsible for all of the business' debts and liabilities. No real separation between you and the business. Harder to build business credit.
What is it?
Simplest business entity. One person or married couple is the only owner and operator off the business. Only need some licenses or permits depending on your sector, to start operations.
Limited Partnership
Pros
As the investor, it's a good option for raising money as you don't have much liability. As the operator, you get to maintain control over the business.
Cons
As the operator, you are personally responsible for the business' debts and liabilities. More expensive to create due to state filing. As the investor, you could be liable by taking a too active role in the business
What is it?
It is a registered business entity, because paperwork is needed to form a limited partnership. There are two roles: Those who operate and assume liability; Those who only act as an investor.
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General Partnership
What is it?
Pretty similar to ''Sole Proprietorship'', but the business has two or more owners, whom are actively managing the business, and share the profits and losses.
Pros
A single person doesn't absord all the losses on the business because everything is divided between the partners. (The rest Pros are the same as ''Sole Proprietorship'')
Cons
Each partner may be personally liable for another partner's negligent actions. Disputes among partners can occur. (The rest Cons are the same as ''Sole Proprietorship'')