Chapter 9 Book

Chapter 9 Book - Chapter 9 Business Entities Business...

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Chapter 9 Business Entities Business Entities There are three major types of business entities. 1) sole proprietorship 2)partnership 3)corporation, and limited liability company. Sole Proprietorship o Oldest and simplest o No formalities in creating assuming you have legal right to open (have obtained all permits, degrees, licenses, etc) o No special rules or regulations to follow o Owner is the business and vice versa o Major disadvantages – unlimited liability, difficulty selling the business, difficulty raising capital o The owner has unlimited liability – personally responsible for all of the debts of the business. o Very difficult to get investors to invest in a sole-proprietorship. o Owner is the business and so claims all income and or loss for tax purposes. Partnership o Makes management of the partnership a joint operation o Partners have unlimited liability (each partner is liable for all of the partnerships debts) o Good practice to have a very detailed written partnership agreement specifying all vital information to the partnership. o Partnership is the least favorite of the three major historical forms. Corporation o Most popular form of business entity for large businesses. o Most of the business in the U.S. is done by corporations. o A corporation is created by a state statute. o Corporation is taxed as a legal entity, and shareholders are taxed on income that is didspersed to them, creating double taxation. o One major advantage of corporation is that it has limited liability. Owners are liable only for their investment o Makes it much easier to raise capital. Limited Partnership o Created by state statute like a corporation and requires a filing of documents to create. o
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This note was uploaded on 10/02/2011 for the course MGMT 209 taught by Professor Swim during the Spring '08 term at Texas A&M.

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Chapter 9 Book - Chapter 9 Business Entities Business...

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