Professional Documents
Culture Documents
Evaluation Criteria
Tax consideration
Liability exposure
Start-up and future
capital requirement
Control
Managerial ability
Business goals
Management
succession plans
Cost of formation
Sole Proprietorship
Sole Proprietorship
Advantages
Simple to create
Least costly form
Profit incentive
Total decisionmaking
No special legal
restrictions
Easy to discontinue
Sole
Proprietorship
Disadvantages
Unlimited personal
liability
Limited skills and
abilities
Feelings of isolation
Limited access to
capital
Lack of continuity of
business
Partnership
An association of
two or more
people who coown a business
for the purpose
of making a profit
Partnership
Advantages
Easy to establish
Complementary skills
Division of profits
Larger pool of capital
Ability to attract limited
partners
Little governmental
regulation
Flexibility
Taxation
Partnership
Disadvantages
Unlimited liability of
at least one
Difficulty in
disposing of interest
Lack of continuity
Potential for
personality and
authority conflicts
Partners bound by
law of agency
Special Partnerships
Limited partnership-composed of at
Corporations
A separate legal entity apart from its
owners which receives the right to exist
from the state in which in which it is
incorporated
Domestic
Foreign
Alien
Publicly held
Closely held
Corporations
Certificate of Incorporation
Name
Statement of purpose
Time horizon
Names and addresses of incorporators
Place of business
Capital stock authorization
Capital required at time of incorporation
Provisions for preemptive rights
Restrictions on transfering shares
Names and addresses of officers
By-laws
Corporations
Advantages
Limited liability of
stockholders
Ability to attract
capital
Ability to continue
indefinitely
Transferable
ownership
Corporations
Disadvantages
Cost and time in
incorporating
Double taxation
Potential for
diminished incentives
Legal requirements
and red tape
Potential loss of
control
An S Corporation
S Corporation
Advantages
All of advantages of a regular C
corporation
Single taxation
Avoids tax on appreciation of asset
sold
Pay SSS for employees
Different lines of businesses as
subsidiaries, simpler tax filing
S Corporation
Highly profitable service companies
S Corporation
Liquidating
Pay all taxes and debts
Obtain written approval of shareholders
to dissolve company
File statement of intent to dissolve with
secretary of state
Distribute all remaining assets
Limited Liability
Company
A relatively new form of ownership that, like
Limited Liability
Articles of organization-name and address,
Corporation
method of management, duration, names
and addresses of each organizer
Operating agreement-no more than 2 of:
Limited Liability
Corporation
Limited personal liability
No limit on number of shareholders
No ban on nonresident alien
No restriction on a members ability to
Professional Corporation-
lawyers, accountants,
doctors, dentists, etc.
Joint Venture-partnership
formed for a specific
purpose