Basic Forms of Ownership for Your Business

Choosing the most suitable form of business for your company is essential, because it will determine how the money flow in and out, how much tax you pay, how the business is organized and how it is handles. Although the forms of ownership vary by jurisdiction, there are some basic types you will certainly encounter:

Sole proprietorship

A sole proprietorship is a business owned by a single person who can operate alone or hire other employees. That person owns all the equipment and may even own the building where the business is housed. This is one of the simplest forms of ownership, because it permits a high degree of flexibility for the owner. Due to the of the unlimited liability for the owner, some creditors are more willing to give money. Moreover, the owner receives all the profit. However, a sole proprietorship has some disadvantages. The single owner is responsible for all business debts and risks losing his personal assets in case of a lawsuit or bankruptcy. Moreover, some banks are reluctant to grant loans because of the high mortality rates and limited assets.

Partnership

A partnership is a business owned by two or more people, so each partner has unlimited liability for business debts. There are three categories of partnership, limited partnership, limited liability partnership and general partnership. The advantages of this business form is that it is easy to start, because it should have all the agreements established ahead of time, it is not difficult to raise capital and there are not many regulations. The disadvantages are that there is a limited life of the business, the partners have unlimited liability, the profits are shared and disagreements may occur.

Corporation

A corporation is one of the forms of ownership that have separate legal personality from its owners. This limited liability business is owned by stockholders or investors, but it is operated by officers. This type of business can be privately owned or owned by the government. The shareholders of a privately owned, for-profit corporation elect a board of directors to manage the staff and direct the course of action. Its advantages are an unlimited life of business, limited liability, quick access to capital (loans, stocks) and shared risks. However, it is difficult to start a corporation, owners have less direct control and there is a double taxation for individual and corporate tax.

Cooperative

These forms of ownership can be organized for both non-profit and for-profit. A not-for-profit cooperative has members who share the authority, as opposed to shareholders. This business type follows the economic democracy ideology and has limited liability. Forming a cooperative is slightly different from other business entities, because a group of potential members must agree on a strategy and a common need.

The type of business ownership that one chooses depends on the type of business that they want to build. Therefore, before choosing the ownership, a future business owner must develop the business plan and the future strategies while also keeping in touch with the latest business trends. If you want to know more about these matters, you should try www.paydiddy.com. This website is very useful for both small business owners as well as big company managers. It is important to understand that one cannot make the best decisions for a business unless they understand all the aspects of that business as well as the financial situations and the present economic fluctuations which will affect it. Therefore, all business owners and managers who want to achieve success should subscribe to various business websites and magazines. The business world is constantly changing and the only way to keep up with it is to find a way to be connected to it at all times.

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