Kinds of Business

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De Gula, Shiela Mae
BSBA-HRDM 1-6D

3 kinds of business

1 Sole Proprietorship

A sole proprietorship places all liabilities for finances and operations on the owner. The owner's personal property is tied to the business, so he assumes a risk against his personal assets should the business experience financial hardship. Annual income tax returns are filed on a Form 1040, and the owner must also file self-employment taxes. The profits and losses of the business are reported through the owner and are taxed at the individual rate. The sole proprietorship business entity is the simplest form to set up, but the owner typically must sell the business to retrieve his investment. 2

3 Partnership

A partnership entity has two or more owners sharing equal control, unless the partnership agreement states otherwise or the structure is set up as a limited partnership. Similar to a sole proprietorship, the profits and losses of the business flow to the partners and are taxed at the individual rate. Operating partners assume risks both legally and financially. Creditors can attempt to collect debts from the partners personal assets. To recoup his investment, a partner is generally required to sell his interest in the business. 4

5 Corporation

A corporation can have an unlimited number of owners, also known as shareholders. In a corporation, the business entity remains separate from the owners in legal and financial matters. The profits and losses of a corporation are taxed at corporate rates, not individual rates. If the corporation realizes a profit, it is paid out to shareholders who must then report it as income and pay taxes on it at the individual rate. A shareholder in a privately held corporation must sell his interest to regain his investment. In a publicly held corporation, a shareholder can trade his shares on the open market.

3 broad classes of business enterprise

Service Business – A service type of business provides intangible...
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