StaabH_M2_A2.doc - Types of Legal Ownership Ownership Structures Sole Proprietor General Partnership Limited Liability Corporation Company(LLC Number of

StaabH_M2_A2.doc - Types of Legal Ownership Ownership...

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Types of Legal Ownership Ownership Structures Sole Proprietor General Partnership Limited Liability Company (LLC) Corporation Number of Owners One Two + One or more Multiple Formation Difficulty None. Just buy equipment needed and let people know you are in business. Low Medium High Liability Sole proprietor has unlimited liability. Unlimited liability limited partners are not responsible for the debts of the business beyond the amount of their investment Officers/shareholders are not typically responsible for the debts of the corporation. Operational Requirements None – owner makes all decisions solely There are relatively few legal requirements. There are relatively few legal requirements. Formal board of directors, annual meetings, and annual reporting required. Management Sole proprietor has full control of management and operations. all owners share in operating the business and in assuming liability for the business's debts. Members have an operating agreement that outlines management. corporations have their own identity, they are separate from their owners. Separate management from ownership. Federal Taxation there are no special tax considerations It is not a taxable entity. Each partner pays tax on his/her share of income and can deduct losses against other sources of income. Taxed as personal income. It is taxed at the entity level. If dividends are distributed to shareholders, they are also taxed at the individual level. Types of Legal Ownership Page 1 of 4 Introduction to Business in a Technology World ©2011 Argosy University Online Programs
2 Topic Title Document Title Before starting a business, it is beneficial to think about the type of ownership you are wanting to use. While most small businesses may start as a sole proprietorship they can have the potential to grow all the way to up to a corporate business with the right motivation, marketing, and placement. There are four basic ownerships that I will address to get you thinking about which would help your business be the most successful. First you need to think about yourself, what risks you want to take and how motivated you are to own and run a business by yourself or with other people. The first option to think about is sole proprietorship. This is a business that is started and finished by you. You own the business in its entirety. In a sole proprietorship, there is no distinction between you and the business. If you succeed, then so does your business. But in the same relation, if your business fails then you also will fail. To be a sole proprietor you need to be goal driven, and extremely motivated to make your business work. Even though a sole proprietorship is the easiest to start it can quickly become the hardest to manage alone. To get started as a sole proprietor you may need to get a business license and register your business. The next step is just purchasing your equipment and letting people know you are now open for business. Starting from scratch can be difficult and may take many months to years to establish a client base. This is where your hard work

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