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Document 12

The document outlines four types of business structures: Sole Proprietorship, Partnership, Corporation, and Limited Liability Company (LLC). Each structure has distinct definitions, key features, advantages, disadvantages, and examples, highlighting aspects such as liability, control, and complexity. Sole Proprietorships are simple and inexpensive, Partnerships share responsibilities, Corporations offer limited liability but are complex, and LLCs combine features of both corporations and partnerships.

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13 views5 pages

Document 12

The document outlines four types of business structures: Sole Proprietorship, Partnership, Corporation, and Limited Liability Company (LLC). Each structure has distinct definitions, key features, advantages, disadvantages, and examples, highlighting aspects such as liability, control, and complexity. Sole Proprietorships are simple and inexpensive, Partnerships share responsibilities, Corporations offer limited liability but are complex, and LLCs combine features of both corporations and partnerships.

Uploaded by

dheerajsikar87
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

1.

Sole Proprietorship

Definition:

A business owned and managed by one individual.

Key Features:

 Simple and inexpensive to establish.


 The owner has complete control over the
business.
 Profits and losses are reported on the owner's
personal tax return.
 The owner has unlimited personal liability for
business debts.

Advantages:

 Full control over decision-making.


 Minimal regulatory requirements.
 Easy to set up and dissolve.

Disadvantages:

 Unlimited personal liability.


 Limited ability to raise capital.
 Reliance on the owner’s skills and resources.
Example:

A freelance graphic designer or a local bakery run


by one person.

2. Partnership

Definition:

A business owned and managed by two or more


people.

Key Features:

 Can be general (all partners share


responsibility) or limited (some partners are
investors only).
 Partners share profits, losses, and decision-
making.
 Each partner is personally liable for the
business's debts unless it's a limited
partnership.

Advantages:

 Shared responsibilities and resources.


 More capital and expertise than a sole
proprietorship.
 Easier to establish than a corporation.

Disadvantages:

 Unlimited liability for general partners.


 Potential for disputes among partners.
 Shared profits.

Example:

A law firm owned by multiple lawyers, such as


"Smith & Brown Law Associates."

3. Corporation

Definition:

A separate legal entity owned by shareholders.

Key Features:

 The corporation itself is responsible for debts


and obligations.
 Shareholders have limited liability.
 Can be a C Corporation (taxed separately
from owners) or an S Corporation (profits and
losses passed to shareholders' personal tax).
Advantages:

 Limited liability for owners.


 Easier to raise capital through stock issuance.
 Perpetual existence, regardless of changes in
ownership.

Disadvantages:

 More complex and expensive to set up.


 Double taxation for C corporations (profits
taxed, then dividends taxed).
 Extensive regulations and reporting
requirements.

Example:

Apple Inc. or Coca-Cola, large multinational


corporations.

4. Limited Liability Company (LLC)

Definition:

A hybrid structure combining elements of a


corporation and a partnership/sole proprietorship.
Key Features:

 Owners (members) have limited liability.


 Business profits and losses are passed through
to members' personal income without
corporate taxation.
 Offers flexibility in management.

Advantages:

 Limited liability for members.


 Fewer regulations compared to a corporation.
 Flexible profit distribution.

Disadvantages:

 Can be more complex than a sole


proprietorship or partnership to establish.
 Laws and regulations vary by state or country.

Example:

A small web development company like "Creative


Web Solutions LLC."

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