types of entrepreunerial business

8/2/2019 Types of Entrepreunerial Business

1/16


2/16

Sole Proprietorship

General Partnerships

Limited Partnerships

C-Corporations

S-Corporations


3/16


4/16

Advantages:

LowAll profits go to owner

start-up costs & All profits go to owner

Freedom from most regulationsOwner has direct control

Easy to exit business

Disadvantages

Unlimited personal liabilityPersonal finances at risk

Total responsibility

May be more difficult to raise financing


5/16

Businesseshaving two

or moreowners

Income and lossespass through topartners and aretaxed at personal

rate

Each partner shouldbring specific

advantages to thebusiness like

capital, industryknowledge, labor

or physical assets They do not requireregistration withlocal, state or

federalgovernments


6/16

Advantages:

Ease of formation

Pooled talent and Resources

Somewhat easier access to financingSome tax benefits

Disadvantages

Unlimited personal liabilityDivided authority and decisions

Potential for conflict

Continuity of transfer of ownership


7/16

consist of generalpartners with fullliability for theorganization & limitedpartners whose liabilityfor the organization arelimited to a set amount(usually the amount oftheir investment)

Income and losses

pass through topartner and are

taxed at personalrate; flexibility in

profit-lossallocations to

partner

Limited liability,although one

partners must retainunlimited liability

They do requireregistration withlocal, state or

hfederalgovernments


8/16

Advantages:

Good way to acquire capital from limitedpartners

Disadvantages

Cost and complexity of forming can be high

Limited partners cannot participate in

management of business without losing liabilityprotection


9/16

C-Corporations areorganized with ownership of

shares of stock which areassignable and transferable.In theory, corporations areseparate legal entities from

the owners

The control andoperation of a

corporation are in thehands of the

shareholders who tendto operate with a board

of directors

Corporations providelimited liability for the

owners as well. Thismeans

that the owners cannotbe sued for the debts ofthe corporation unless

they personally

guaranteed the debtsThey do require

registration with local,state or federal

governments


10/16

Advantages:

Limited liability Transferable ownershipContinuous existence

Easier access to resourcesDisadvantages

Expensive to set up

Closely regulated

Double taxation

Extensive record keeping

Charter restrictions


11/16

The corporations profitsor losses are passed

through to theshareholders. The shareholders then must reportprofits as supplemental

income.

Up to 75 share-holders;no limits on types of

stock or voting

Income and losses passthrough to partners and

are taxed at personalrate.

They dorequire

registrationwith local,

state orfederal

governments


12/16

Advantages:

Easy to set up

Enjoy limited liability protection and tax benefits of

partnershipCan have a tax-exempt entity as a shareholder

Disadvantages

Must meet certain requirements

May limit future financing options


13/16

Unlimited number ofmembers; flexiblemembership

arrangements forvoting rights and

income.

Unlimited numbersof share holders

Income and lossespass through topartners and aretaxed at personalrate; flexibility in

profit-loss allocationto partners

They do requireregistration withlocal, state or

federalgovernments


14/16

Advantages:

Greater flexibility

Not constrained by regulations on C and S

corporationsTaxed as partnership, not as corporation

Disadvantages

Cost of switching from one form to this canbe high

Need legal and financial advice in formingoperating agreement


15/16

2007 Prentice Hall, Inc. All

rights reserved.A15

Structure

Ownership

Requirements Tax Treatment Liability Advantages Drawbacks

Scorporation

Up to 75share-holders;no limits ontypes of stockor votingarrangements

Income andlosses pass

through to

partners and aretaxed at personalrate; flexibility inprofit-loss

allocation topartners

Limited Easy to set up

Enjoy limitedliability protectionand tax benefitsof partnership

Can have a tax-exempt entity as ashareholder

Must meet certainrequirements

May limit futurefinancing options

Limitedliabilitycompany(LLC)

Unlimitednumber ofmembers;

flexible

membershiparrangementsfor votingrights andincome


through to

partners and are

taxed at personalrate; flexibility inprofit-lossallocations topartners

Limited Greater flexibility

Not constrainedby regulations onC and S

corporations

Taxed as partner-ship, not ascorporation

Cost of switchingfrom one form tothis can be high

Need legal and

financial advice informing operatingagreement


16/16

2007 Prentice Hall, Inc. All

rights reservedA16

StructureOwnership

Requirements Tax Treatment Liability Advantages Drawbacks

Limitedliabilitypartnership(LLP)

Two or moreowners


through to

partner andare taxed atpersonal rate;flexibility in

profit-lossallocations topartners

Limited,althoughonepartnersmustretainunlimited

liability

Good way toacquire capitalfrom limitedpartners

Cost andcomplexity offorming can behigh

Limited partnerscannot participatein management ofbusiness withoutlosing liabilityprotection

Ccorporation

Unlimitednumber ofshareholders;no limits on

types of stock orvotingarrangements

Dividendincome istaxed atcorporate and

personalshareholderlevels; lossesand deductionsare corporate

Limited Limited liabilityTransferableownershipContinuous

existenceEasier access toresources

Expensive to setup

Closely regulated

Double taxation

Extensive recordkeeping

Charterrestrictions

types of entrepreunerial business

Documents