Forms of Business Flashcards
4 Forms of Business
- Sole Proprietorship
- Partnership
- Corporation
- Limited Liability Company (LLC)
Sole Proprietorship - aspects
- declare that you exist
- quick, easy, affordable, and adaptable
Sole Proprietorship - Challenges
- Risk
- Personal Exposure
- Credibility
- Raising Capital
Sole Proprietorship - Liability
The principal’s personal assets are not protected from debts or liabilities
Sole Proprietorship - Taxation
Not subject to corporation income taxation
2 types of Partnerships
- General Partnership
- Limited Partnership
General Partnership
An association of two or more people who are co-owners and co-managers of the business who also share in profits of ongoing business
General Partnerships - aspects
- Mutual agency
- Unlimited Liability
- Share risk/wealth equally
Limited Partnerships - aspects
- No mutual agency
- Limited Libaility applies in certain cases
- Don’t share risk/wealth equally
Corporation
- A seperate legal entity (no single person is responsible)
- A corporation is designed and required by U.S. law to create wealth for stockholders
5 Types of Corporation
- Conventional (C) Corporation
- Domestic Corporation
- Foreign Corporation
- Alien Corporation
- Benefit (B) Corporation
Conventional (C) Corporation
a state charteres legal entity with authority to act and have liability seperate from its owners (its stockholders)
Conventional (C) Corporation - aspects
- allows many people to share in ownership
- Can share in profits when working there
Domestic Corporation
operates in state in which incorporated
Foreign Corporation
operates in states other than states in which incorporated
Alien Corporation
organized in one country and operate in another
Disadvantages of Corporations
- Initial Cost
- Extensive Paperwork
- Double Taxation
- Two tax returns
- Size
- Difficulty of termination
- Possible conflict with stockholders and board of directors
2 Types of Stock
- Common Stock
- Preferred Stock
Common Stock - aspects
- Voting rights (proxy - shareholders can delegate voting power to someone else)
- residual claims to assets (common stockholders are last in line to recieve any remaining company assets if business is liquidated)
