Thursday, February 2, 2017

Business Organization - types, pros and cons (a quick overview)

There are mainly four forms of business organization:
  1. Sole proprietorships
  2. Partnerships
  3. Corporations
  4.  Limited liability corporations(LLC)  and partnerships.

Advantages:

  • For the first two, advantages include the ease and low cost of formation. 
  • The advantage of corporations include limited liability, indefinite life, ease of ownership transfer, and access to capital markets. 
  • Limited liability companies and partnerships have limited liability like corporations.

Disadvantages:

  • Sole Proprietorship's cons:
    1. Difficulty in obtaining large sums of capital
    2. Unlimited personal liability for business debts
    3. Limited life.
  • Partnership's cons:
    1. Unlimited liability
    2. Limited life
    3. Difficulty of transferring ownership
    4. Difficulty of raising large amounts of capital.
  • Corporation's cons:
    1. Double taxation of earnings.
    2. Setting up a corporation and filing required state and federal reports, which are complex and time‐consuming.
  • Cons of Limited liability corporations and partnerships:
    1. Difficulty in raising capital and the complexity of setting them up.

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