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Types of Business Structures: Sole Proprietorship vs. Partnership vs. Corporation

Learn about the benefits and costs of Sole Proprietorship, Partnership, and Corporation business structures. Understand the advantages and disadvantages to help you choose the best fit for your situation.

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Types of Business Structures: Sole Proprietorship vs. Partnership vs. Corporation

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  1. TYPES OF BUSINESSES

  2. SOLE PROPRIETORSHIP A business that is owned and managed by one individual who receives all the profits and bears all the losses.

  3. Benefits: Sole Proprietorship • Ease of starting and going out of business • Control over profits and business operations • Pride of ownership • Lower taxes (pays no corporate income taxes)

  4. Costs: Sole Proprietorship • Unlimited liability • Difficulty in raising financial capital • Responsible for all losses • Management knowledge may be limited

  5. PARTNERSHIP A business that is owned and managed by two or more individuals who receive all the profits and bear all the losses.

  6. Benefits: Partnership • Easier to raise financial capital • Partners may combine managerial skills • Personal satisfaction • Lower taxes (pays no corporate income taxes)

  7. Costs: Partnership • Unlimited liability • If a business cannot pay its obligations, the owner(s) must pay them. • Shared profits • Possible conflicts between partners • Possible instability after death of a partner

  8. CORPORATION A business that is owned by stockholders and has rights and responsibilities as if it were a person.

  9. Benefits: Corporation • Limited liability • Greater financial capital • Unlimited life • Specialized management

  10. Costs: Corporation • Increased taxation (pays corporate income taxes) • Difficulty in starting (each state has its own rules for a corporate charter) • May be larger, more bureaucratic than other forms of business • Increased government control

  11. Which type is best? • Depends on your situation! • They all have strengths and weaknesses.

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