Entrepreneurship Chapter 7

Disadvantages of Partnership

It is difficult to dissolve can be held liable for each others' actions There may be personality conflicts.

Advantages of Sole Proprietorship

Sole proprietorship is easy and inexpensive to create. The owner has complete authority over all business activities It is the least regulated form of business ownership. The business pays no taxes; income is taxed at personal rate of owner.

Disadvantages of Sole Proprietorship

The owner has unlimited liability. The business is totally reliant on skills and abilities of owner. The death of owner dissolves the business unless there is a will to the contrary Raising capital is more difficult.

sole proprietorship

a business that is owned and operated by one person

corporation

a business that is registered by a state and operates apart from its owners; it issues shares of stock and lives on after the owners have sold their interest or passed away

limited liability company (LLC)

a company whose owners and managers have limited liability and some tax benefits, but avoids some restrictions associated with Subchapter S corporations

subchapter S corporation

a corporation that is taxed like a partnership; profits are taxed only once at the shareholder's personal tax rate

nonprofit corporation

a legal entity that makes money for reasons other than the owner's profit; it can make a profit, but the profit must remain within the company

general partner

a participant in a partnership who has unlimited personal liability and takes full responsibility for managing the business

limited partner

a partner in a business whose liability is limited to his or her investment; a limited partner cannot be actively involved in managing the business

C-corporation

an entity that pays taxes on earnings; its shareholders pay taxes as well

shareholders

an owner of shares of stock in a corporation

partnership

an unincorporated business with two or more owners who share the decisions, assets, liabilities, and profits

Advantages of Partnership

are inexpensive to create. can share ideas can share ideas and secure investment capital more easily and in greater amounts.

unlimited liability

full responsibility for all debts and actions of a business

liability protection

insurance against the debts and actions of a business

limited liability

partial responsibility of a corporate shareholder; he or she is responsible only up to the amount of the individual investment