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Forms of Business Ownership Characteristics

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Forms of Business Ownership Characteristics

Sole Proprietorship: The business and the owner are the same entity; there is no distinction between the two. It is very easy to start-up. It can be difficult to raise working capital. • Liability – The business owner is fully liable for all business debts. • Income Taxes – All profits or losses are passed through the business to the business owner. The business owner reports profits or losses on their individual income tax reports. The business itself is not taxed as an entity. • Longevity or Continuity of the Organization – Generally, the business ends if the owner dies or stops conducting business activities. The business owner can have plans and authorizations in place that would allow the business to continue. • Control – The business owner has complete authority in the daily management of business operations. There are no partners. • Profit Retention – Profits or losses go to the business owner. • Location – To do business outside of its original state, the sole proprietorship will file a Doing Business As statement in each state it intends to do business. Foreign qualification is not required. • Convenience or Burden – The business owner may have to file for state and/or local permits.

General Partnership: Two or more people decide to do business together. The business and the owners are the same entity; they are not separated legally. It is very easy to start-up. It can be difficult to raise working capital. • Liability – All the business partners are fully liable for all business debts. If one partner cannot pay their share, the other partner(s) are responsible to cover the balance of the liability. • Income Taxes – All profits or losses are passed through the business to the business partners. The business partners report profits or losses on their individual…...

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