Business Ownership Flashcards
The types of business ownership:
The most common types of business ownership are sole proprietorship, partnership, limited liability company (LLC), and corporation.
Sole Proprietorship
A sole proprietorship is an unincorporated business owned by one person. The owner pays personal income tax on profits earned from the business. This is the easiest to establish/take down due to a lack of government regulation. All liability falls on the owner.
Partnership
A partnership is a formal arrangement between two or more parties to manage and operate a business and share its profits. All partners share liabilities and profits/profit loss equally. Some professionals may join a limited liability partnership (LLP).
Limited Liability Company (LLC)
A business structure in the U.S. that protects its owners from personal responsibility for its debts or liabilities. LLCs are hybrid companies made from characteristics of both corporations and sole proprietorships. There is limited liability. Depending on state law, an LLC may have to be dissolved upon the death or bankruptcy of a member.
Corporation
A corporation is a legal entity that is separate and distinct from its owners. They can enter contracts, loan and borrow money, sue and be sued, hire employees, own assets, and pay taxes. Corporations have limited liability. Shareholders profit through dividends and stock appreciation but are not personally liable for the company’s debts.
