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Fin 571 Three Types Of Businesses

831 words - 4 pages

Three Main Business Structures
Graling Carmichael
FIN/571 Operations Management
November 3, 2014
Danica Djordjevich

Three Main Business Structures
There are normally seven types of business used in the United States; sole proprietorship, partnership, limited liability partnership, limited liability company, S corporation, franchise, and corporation. For the purpose of this paper, I will concentrate on the three main business structures of sole proprietorship, partnerships and corporations and explain how each might or might not be advantageous.
Sole Proprietorship
A sole proprietorship is a business owned by one person. About three-fourths of the businesses in the US ...view middle of the document...

Approximately 10% of US businesses are organized in this manner. There are two main types of partnerships; general and limited. Partnerships have specific advantages such as each partner has one vote regardless of the relative size of their capital input or share in the partnership’s revenues. General partnerships do not pay federal income taxes. Instead, the revenue and financial losses of the partnership have to be reported on the individual partners’ personal income tax returns.
There are key disadvantages of partnerships. One significant drawback is all partners have limitless liability for the partnership’s financial obligations and activities, regardless of the percentage of the company they own. The problem of limitless liability can be prevented in a limited partnership, which consists of general and limited partners. A partnership must have a profit objective in order to qualify as a partnership, even though the business does not have to make a profit.
Corporation
Most of the big businesses in the US are corporations. A corporation is a legal body sanctioned under a state charter. Corporations can sue and be sued, enter into contracts, issue debt, borrow money, and own assets, such as real estate. A key benefit of the corporate form of business organization is that stockholders have limited liability for debts and other obligations of the corporation (Research Starters, 2014). The corporate cover of limited liability occurs because corporations are legal persons that borrow in their own names, not in the names of any individual owners. Corporations can subtract the cost of benefits packages that it offers to its personnel.
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