Sole Proprietorship, Partnership and Corporations

Sole Proprietorship, Partnership and Corporations

Entrepreneur: Willing to take a risk to start a business Gather the factors of production Must learn as much as possible about the

business Laws, regulations and tax codes

Expenses Purchasing of materials and capital

Advertising Letting potential customers and vendors/partners

know of your business Receipts and Record Keeping

Must keep a solid system of tracking expenses and income

Essential for safely saving and filing records Risk

Every business has this element Balancing between risk and reward is considered

by some the most essential part

Income – All Expenses = Profits

Expenses: Wages, Taxes, Parts, Utilities, etc.

Business owned and run by one individual Proprietor = Owner Oldest form and most common business Advantages:

Ease of Operation Potential Profits “You’re the Boss”

Disadvantages: Limited Life Limited Funds Limited Abilities Unlimited Liabilities (legally responsible)

Business owned by two or more persons Limited: partners not sharing equal

responsibility General: full duties and responsibilities Advantages:

More Money (Capital) Available “Two heads are better than one”

Disadvantages: Unlimited Liability Limited Life Limited Funds Partners May Disagree

Business licensed (charter) by state or federal government as a legal individual

Stockholders (shares) are true owners of corporation

Advantages: Limited Liability Unlimited Life Easy Transfer of Ownership

Disadvantages: Costly and Complicated to set up Double Taxation

Corporate and Personal Income Tax