supplements. profit-making enterprises sole proprietorship: partnership: corporation:
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CHAPTER 1Supplements
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TYPES OF BUSINESS ENTITIES Profit-making enterprises
Sole proprietorship:
Partnership:
Corporation:
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SOLE PROPRIETORSHIP UNINCORPORATED business owned by
one person. Owner is manager Accounting: viewed as a separate entity Taxes: not separate from owner
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PARTNERSHIP UNINCORPORATED business owned by TWO or
more persons knows as PARTNERS. Usually created by partnership agreement
(how to divide income and how to distribute net assets upon dissolution).
Legally, each partner in a general partnership is responsible for the debts of the partnership.
Accounting: Considered a separate entity Taxes: More complex, but flows to partners
tax returns. Other types of partnerships: Limited
partnerships
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CORPORATIONS Incorporated under state regulations
and laws. Owners are called SHAREHOLDERS or
STOCKHOLDERS. Owners own shares of stock in the
company ACCOUNTING: Separate entity Taxes: Separate entity -- corporate tax Board of Directors -- Oversight
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CORPORATIONS Dominant form of business in the US (by
size) Advantages of Corporate form:
Limited liability of ownersContinuity of lifeEase of transferring ownership (sale of
stock)Opportunity to raise large amounts of
capital (cash) from large numbers of people. Disadvantages of Corporate form:
Double taxation