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November 1, 2010 Legal Forms of Business Ownership (cont) Lecture Notes for Different Types of Business Ownerships

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Jim Mc Cutcheon

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November 1, 2010
Legal Forms of Business Ownership (cont)
Partnerships make up 9% of business =4% of total sales
sole proprietorships make up 74% of business=9% of total sales
Corporations make up the remainder=remainder
When to Incorporate from a Tax Perspective?
Sole Proprietorship
Easy to form and dissolve
Owner has sole claim on all the profits
High levels of personal incentive, freedom and satisfaction
Speed of decision making
Maximum levels of secrecy
Tax advantages
Government support (small business)
Unlimited liability
Difficulty in raising capital
Lack of continuity
Management Limitation
Tax disadvantages
Partnerships: Def
An unincorporated business owned and operated by more than one person for his or her own private profit
Partnerships are always formed by agreement
This agreement can be either verbal or written( should be in writing) called a Partnership Agreement
The Partnership Agreement
o A legal agreement that outlines all of the rights and responsibilities of the partners
o Designed to prevent future ill will and misunderstanding btw partners
o Should serve as the basis of resolving any conflict or disagreement btw the partners
o Outlines how certain issues should be handled
Name of all partners
Type of partner...general or limited
Initial financial contribution of each partner
How profits will be allocated
Process to be followed if adding a partner
Process to be followed if one partner wants to withdraw his or her investment (using a lawyer is best)
Relatively easy to form
o Needs a Partnership Agreement
Larger Availability of Capital
High levels of personal involvement and satisfaction
Potential diversification of management skills and
Unlimited liability...joint and several
Potential managerial
Slower decision making
Difficulty in withdrawing ones
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