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Different forms of business ownership
Essay on the 5 types of business ownership
Essay on the 5 types of business ownership
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Sole Proprietorship A sole proprietorship is a business owned and controlled by a single individual. There are more sole proprietorships than any other type of business available (Lau, 2011). It is a simple type of business to set up, as well as simple to terminate. The proprietor has the freedom to determine operating hours, what services or goods to provide, where it operates, and what contracts to enter into without needed to consult another party. With full control, however, comes full liability. A proprietor is personally liable for all financial obligations whether they be debts from company operations or restitution ordered to be paid from third party suits. It can also be difficult to secure financing for a sole proprietorship as banks look at the business as an individual. Often, banks will treat loans to proprietorships as personal loans to the proprietor and require collateral. Liability. All liability rests with the owner of the sole proprietorship. This can put the proprietor in a very difficult position if an individual were to sue the business. The courts consider the proprietor and proprietorship as one so when the business is sued, they are essentially suing the proprietor. All the proprietor’s personal assets such as their house, car, retirement account, and bank account are at risk. Debts the business is unable to cover must also transfer to the proprietor. Income tax. The proprietor and their business are seen as a single individual by the government. As such, they are taxed together, once, as personal income tax. All profits gained through the sole proprietorship are direct income for the proprietor and are taxed as such. Any business expenses or losses can be deducted from their personal income tota... ... middle of paper ... ...ement decisions of the business. Profit Retention. Profits are dispersed between the general and limited partner as designated by their agreement when they became partners. Limited partners typically receive a set amount of the profits. Location (Expansion). All business decisions rest with the general partner. It is fully within their power to move or expand the business as they see fit. Convenience or Burden (Compliance). A general partner not obligated to any outside party. To maintain limited liability, the limited partner must not be involved in any part of the business outside their financial investment. Works Cited Lau, T. a. (2011). The Legal and Ethical Environment of Business. Irvington, NY: Flat World Knowledg. Stevick Jr., G. E. (2006). Essentials of Business Insurance. Bryn Mawr, PA: The American College of Financial Services.
Partnership – “A legal entity formed by two or more co-owners to operate a business for profit.” (Longenecker, Petty, Palich, Hoy, Pg. 202) In a partnership, the advantage for the owners is the capability to reduce the workload and the financial burden, especially if each partner has management skills that enhances the business. The disadvantages of a partnership such as personal conflicts and leadership expectations, therefore this organizational form should only be chosen once all other options have been considered.
Miller, R. L., and Cross, F. B. (2013). The legal environment today: Business in its ethical, regulatory, e-commerce, and global setting. (7 ed.). Mason, OH: South-Western Cengage Learning.
Jennings, M. (2012). Business: Its ethical, legal, and global environment. (9th Ed.) Mason, OH: South-Western Cengage Learning ISBN: 978-0538470544
Jennings, Marianne M. Business: Its Legal, Ethical, and Global Environment. Mason, Ohio: Cengage Learning, 2008. Print.
The owner reports business gain or losses on his or her personal income tax return. A sole proprietor is taxed on all assets from the business at appropriate personal tax rates. The corporation income, and acceptable expenses, is reflected on the person’s tax return. All corporation income is taxed to the owner in the year the business acquire it, whether or not the owner take away the money from the business. No disconnect federal income tax return is acquired of the sole proprietor.
Mallor, J. P., Barnes, A., Bowers, T., & Langvardt, A. W. (2010). Business Law: The Ethical, Global, and E-Commerce Environment (14th ed.). New York, NY: McGraw-Hill/Irwin.
Kubasek, N., Brennan, B., & Browne, M. (2012). The legal environment of business: A critical thinking approach (6th ed.). Upper Saddle River, NJ: Pearson Education.
Ferrell, O. C., Fraedrich, J., & Ferrell, L. (2013). Business ethics: Ethical decision making and cases: 2011 custom edition (9th ed.). Mason, OH: South-Western Cengage Learning.
There are many different types of business structures, but if you own and operate a business that it is a sole
A Sole Trader is a business that is owned by only 1 person. They are
Sole tradership is when the business is fully owned and managed by one person, though others can be employed to help run the business. As the sole traders only financial income is from the business and/or bank loan, they do not have the resources to expand and cover regional or national areas. These types of businesses are located in the small business sector and usually cover local areas. Such businesses could be hairdressers, corner shops or market stalls etc. Sole traderships have unlimited liability so if the business fails to pay its debts the financial responsibility falls on the owner/s to pay the debts in full even if they have to sell their business, personal possessions and assets.
Cheeseman, H., (2013). Business law: legal environment, online commerce, business ethics, and international issues. (8th ed.), (pp. 168-205). New Jersey: Pearson Education.
Before a partnership formation is imminent, the business needs to decide on which type of partnership to form. There are three types of partnerships: (1) general partnerships, (2) limited partnerships, and (3) joint ventures. All three partnerships contain two or more owners, but all partners assume equal division of ownership, liabilities, and profits in a general partnership. Limited partnerships offer limited liability protection based on each partner’s contribution percentage. Joint ventures are classified as general partnerships with limited existence periods. Once a type of partnership has been determined, the business fulfills a series of requirements before the partnership can be successfully formed. The first step is to register
Owning Your Own Business There are many advantages and disadvantages when owning your own business. When you own your own business, it’s known as a sole proprietorship. But with any type of business, there will always be advantages and disadvantages. Five advantages to owning your own business are: 1) The owner receives all profits, meaning that all earnings go to the sole proprietor, or the owner, and isn’t shared with anyone else.
1.LIABILITY: There are no limits on liability with a sole proprietorship, the owner is responsible for all the businesses debts and obligations. The earning power of a sole proprietor can be limited due to lack of capital. The sole proprietor is only able to obtain personal credit to expand the company, the bank will not treat the company as its own entity