BUSI 1800 Chapter Notes - Chapter 6: Limited Liability Partnership, Sole Proprietorship, Limited Partnership
2 May 2018
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BUSI 1800
Chapter 6: Forms of Business Ownership
Starting a Small Business:
• Sole Proprietorship: a business that is owned, and usually managed, by one person
• Partnership: a legal form of business with two or more parties
• Corporation: a legal entity with authority to act and have liability separate from its
owners
• Unlimited Liability: the responsibility of business owners for all of the debts of the
business
Sole Proprietorship:
Advantages:
• Ease of starting and ending
• Be your own boss
• Pride of ownership
• Retain profit
• No special taxes
• Less regulation
Partnerships:
• General partnership: all owners share in operating the business and in assuming liability
for the usiess’s dets
• Limited partnership: one or more general partners and one or more limited partners
• General Partner: an owner (partner) who has unlimited liability and is active in
managing the firm
• Limited partner: an owner who invests money in the business but does not have any
management responsibility or liability for losses beyond the investment
• Limited liability: the responsibility of a busiess’s owers for losses oly up to the
amount they invest; limited partners and shareholders have limited liability
• Limited liability partnership (LLP): liits parters’ risk of losig their persoal assets to
only their own acts and omissions, including those under their supervision
• Partnership agreement: legal document that specifies the rights and responsibilities of
each partner
Advantages:
• More financial resources
• Shared management and pooled,
complementary skills and knowledge
• Longer survival
• Shared risk
• No special taxes
Disadvantages:
• Unlimited liability
• Limited financial resources
• Management difficulties
• Overwhelming time commitment
• Few fringe benefits
• Limited growth
• Limited lifespan
• Possibly pay higher taxes
Disadvantages
• Unlimited liability
• Division of profits
• Disagreements among partners
• Difficulty of termination
• Possibility of higher taxes
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