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About this document
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- 3 pages
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- $3 one-time, yours to keep
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- Format
- Subject
- Accounting, Business
- Module
- Week 2 · Week 2
This document compares the four main types of business organization: sole proprietorship, partnership, corporation and limited liability company. It helps students understand the advantages and disadvantages of each, and how to choose the best one for a small business idea.
What's inside
- Sole proprietorship: definition and examples
- Partnership: definition and examples
- Corporation: definition and types
- Limited liability company: advantages
- Small business idea: 'Pet for a Day'
Who it is for: Students taking the ACC 561 course. (Postgraduate)
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Summary
Starting a new business involves choosing between different types of business organization. Business types differ in how they affect tax, liability, accounting and legal matters. A small business idea is also discussed.
Sole proprietorships
This section describes sole proprietorships. A sole proprietor runs the business and faces all its tax consequences.
Partnerships
A partnership involves two or more owners. They share profits and losses based on their agreed terms. Partnerships often involve combining financial resources or skills.
Corporations
Corporations include C and S corporations. These differ in how they are taxed. Shareholders own the corporation and are protected from company liabilities.
Small business idea
One example business is described. The business idea is evaluated to see which type of business entity is best to use. The startup costs and overheads are considered.
Key terms
- sole proprietorship
- A single owner trades and runs the business, and faces all the consequences.
- partnership
- Two or more owners share the business's ownership, profits and losses.
- corporation
- A separate legal entity where shareholders own the business.
- C corporation
- A type of corporation that pays its own taxes.
- S corporation
- A corporation where income is passed through to shareholders and taxed at their level.
- limited liability company
- A business type that combines pass-through taxation and limited liability.
Questions this document helps with
- Which type of business entity should I choose for my small business?
- How do sole proprietorships and partnerships work?
- What are the differences between C and S corporations?
Summary written with AI from the document's text.
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