SOLE PROPRIETORSHIP: It is an unincorporated business with one owner who pays personal income tax on profits from the business. With little government regulation, they are the simplest business to set up or take apart, making them popular among individual self contractors or business owners. The benefit of the sole proprietorship is the tax advantage. The disadvantage of a sole proprietorship is obtaining capital funding.
- Liability: The owner is personally liable for claims against the business. If a sole proprietorship losses a lawsuit or otherwise finds itself in debt, not only will the business be liable for the debt, but the owner will be as well.
- Income Taxes: As a sole proprietor…show more content… The owner is in direct control of all elements and is legally accountable for the finances of such business.
- Profit Retention: Just as a sole proprietor is responsible for all the financial obligations of his business, he also has the sole right to retain all profits generated from the business.
- Expansion: Sole proprietors must simply register a new DBA whenever they move to a new state.
- Compliance: Requires no legal documentation or other formalities except compliance with State and local licensing and taxation requirements. It is easy to set up and easy to ignore some local registration requirements, business licenses and paying taxes on income.
GENERAL PARTNERSHIP: It is made up of two or more entities to carry on the business. The biggest advantage is the tax benefit. And a disadvantage is that all partners are responsible for the company. Not only is a partner liable for contracts entered into by other partners, each partner is also liable for the other partner’s negligence.
- Liability: Each partner contributes money, property, labor, or special skills and each partner shares in the profits and losses from the…show more content… If a partner dies, the surviving partner may need to buy the deceased partners business assets from their surviving heirs.
- Control: In a limited partnership, the unlimited partners are the ones who make decisions towards the day to day running of the business.
- Profit Retention: Profits from a limited partnership do not face taxation twice. A limited partnership is not taxable, and all profits go to the partners and are taxed once depending on the tax rate of each partner.
- Expansion: File documentation for a limited partnership with the Secretary of State. Register with the U.S. Internal Revenue Services for a federal employer ID number. Register with the Department of Revenue Services for a State tax ID number. Obtain workers compensation insurance.
- Compliance: Unlike corporations, limited partnerships are not required to hold annual meetings of the owners, issue partnership interest, and keep personal asset separate from business
