Chapter 9 Flashcards
What are the 6 forms of legal ownership?
Sole Proprietorship General Partnership Limited Partnership C-Corp S-Corp Limited Liability company
Disadvantages of a sole proprietorship
Unlimited liability Difficulty in raising capital Limitations in managerial ability Lack of stability Demands on time Difficulty in hiring and keeping highly motivated employees
Advantages of a sole proprietorship
Ease of starting Control Sole participation in profits and losses Use of owner’s abilities Tax breaks Secrecy Ease of dissolving
Advantages of a partnership include
Greater access to capital (compared to a sole prop.)
Combined managerial skills
Ease of starting (compared to a corp. or LLC)
Clear legal status
Tax advantages
Disadvantages of a partnership include
Unlimited liability Potential disagreements Investment withdrawal difficulty Limited capital availability Instability
Corporation
A separate legal entity that is run by stockholders having limited liability
Advantages of a Corporation
Limited liability: Skilled management team Transfer of ownership Greater capital base Stability Legal-entity status
advantages of a Limited Liability Company
Limited liability Pass-through taxation Investors can manage Unlimited membership Ease of organizing
disadvantages of a Limited Liability Company
The disadvantages of an LLC are due primarily to its relatively recent adoption by state legislatures.
Many people still don’t understand it well, and courts have only begun to form a record of common law.
Other disadvantages include:
Difficulty raising money
No continuity of life
Limited transferability
