Sole Proprietorship -
•LIABILITY – There is no separation between the individual and the business. As the owner and operator of a sole proprietorship, all of the profit and loss is the personal responsibility of the business owner creating unlimited liability. •INCOME TAXES – As a sole proprietor all business income or losses must be reported as personal income tax. The business itself is not taxed separately. •LONGEVITY/CONTINUITY – The sole proprietorship is defunct once the business owner dies, or quits. •CONTROL – The business is controlled by the single business owner. The control cannot be passed to another person. •PROFIT RETENTION – All profits are kept by the business owner. •LOCATION – A sole proprietor can conduct business in one or more states without any regulations. •CONVENIENCE/BURDEN – The convenience lies in the ease of set up of the business. There are limited steps to begin a sole proprietorship. The burden lies in the lack of separation between the business and the business owner. General Partnership -
•LIABILITY – Partners are personally liable for all of the business debts and obligations. This also includes court judgments. •INCOME TAXES – A partnership is not a separate tax entity from the business owners. The IRS treats this as a pass through entity. This means the business does not pay any income taxes on profits; rather this is passed through to the partners. •LONGEVITY/CONTINUITY – Typically when one partnership wants to leave the company the business is generally dissolved. •CONTROL – Control is shared between partners.
•PROFIT RETENTION – In general partnerships profits are shared between partners. •LOCATION – Just like sole proprietorships, general partnerships can conduct business in one or more states without any regulations. •CONVENIENCE/BURDEN – The main advantage of a general partnership is low amount of paperwork needed for registration and its startup cost. A burden of a general partnership is even though there is more than one contributor it can be difficult to get additional funds at a low cost. Limited Partnership -
•LIABILITY – When starting a limited partnership, at least one of partners must have full liability. This is the general partner. Additional partners have limited liability. The limited partners are responsible for company debt from their contributions only. •INCOME TAXES – Income taxes are paid by the partners only after receive they receive their share of the profit. However in the case when a partnership does not meet requirements around limited liability, centralized management, durability and ability to transfer ownership, income of the partnership is then subject to taxation like a corporation. •LONGEVITY/CONTINUITY – A limited partnership is not allowed if any of the general partners dies or leaves the partnership. •CONTROL – Only general partners have the right to manage the company. Limited partners are only investors in the company only. Limited partners are not allowed to make any decisions about how the company is operated. •PROFIT RETENTION – All partners receive the same share of profit, even if their contributions were not the same. •LOCATION – A partnership will distribute its income and pay taxes according to the amount of income earned in each location. •CONVENIENCE/BURDEN – A limited partnership is easy to setup and doesn’t have a large startup cost. The burden is the company cannot continue if any one of the general partners leaves the partnership. C-Corporation -
•LIABILITY- The shareholders of a C-Corp lose their investment in the case of bankruptcy. In the case of bankruptcy when debts to all creditors are satisfied and the company still has assets the shareholders stakes will then be can be returned partially. •INCOME TAXES- A C-corp’s income is covered under corporate taxation. Only after the taxes are subtracted, will the remaining income be paid to shareholders as...