Private Business Ownership

Sole Proprietorship

Most common form of business ownership

Advantages include: easy to start and dissolve, right to all profits (after bills and taxes), time and management flexibility.

Disadvantages include: business owner assumes complete financial responsibility, business owner runs all aspects of the business unless they hire someone to help.

Most common in retail boutiques, repair shops, photographers, salons, home maintenance service providers.

PartnershipsPartnerships can benefit business owners in the following ways: having a partner means greater financial freedom and someone to share in administrative and decision making tasks.

Disadvantages to partnerships include being held responsible for the other partners actions, all debt created is shared amongst partners no matter who created it.

A Limited-Liability partnership limits the liability of partners to the value of their interests in the company.

Downfall to LLPs is when one partner wants to leave they may have to find someone to buy their share of the firm.

CorporationsBeyond popular belief corporations can be any size.

Many advantages to a corporate filing: Stockholders have limited financial risks, personal savings are not tapped into if company goes under, class-action lawsuits are filed against the corporation and not the individual, based on the ability to offer stock sales corporations have access to better financial capabilities.

A major disadvantage is double taxation. Corporations must pay local, state, and federal taxes as well as stockholders have to pay personal taxes on distributions.

S Corporations and LLCs

To get around the double taxation that corporations are subject to, S Corporations and LLCs were created.

Normally these have fewer than 100 shareholders.

Any untaxed profits are paid out as dividends to shareholders - who pay individual taxes.

Limited Liability Corporations are governed by an operating agreement similar to a partnership

LLCs reduce the liability of partners actions.

LLCs are considered to be the “wave” of the future.

Employee and Family Owned Businesses

20% of all employees reported owning stock in their companies.

The reason employee ownership has increased is due to the fact that employees want a share of whatever profit their company is making.

Also, employers want to create a sense of pride and commitment in employees.

Most managers admit though, that employee’s are ill-informed

Family owned businesses take on unique challenges: owners must take into account when making decisions succession, marriages and divorces, compensation, hierarchy and authority, and shareholder control.

Highly important that family run businesses have a written business agreement.

Not-For-Profit Corporations

1.5 Million non-profits in the U.S. today.

Charities, social welfare, government agencies, religious congregations, museums, libraries, conservation groups, and privates schools are among the types of businesses that are eligible for non-profit status.

Very strict regulations in order to become a non-profit.

Non-profits are exempt from paying taxes.