Sole Proprietorship

The sole proprietorship is the simplest business form under which one can operate a
business. The sole proprietorship is not a legal entity. It simply refers to a person who owns the
business and is personally responsible for its debts. A sole proprietorship can operate under the
name of its owner or it can do business under a fictitious name, such as Nancy's Nail Salon.
The fictitious name is simply a trade name--it does not create a legal entity separate from the
sole proprietor owner.

The sole proprietorship is a popular business form due to its simplicity, ease of setup,
and nominal cost. A sole proprietor need only register his or her name and secure local
licenses, and the sole proprietor is ready for business. A distinct disadvantage, however, is that
the owner of a sole proprietorship remains personally liable for all the business's debts. So, if a
sole proprietor business runs into financial trouble, creditors can bring lawsuits against the
business owner. If such suits are successful, the owner will have to pay the business debts with
his or her own money.

 The advantages of a sole proprietorship include:

 Owners can establish a sole proprietorship instantly, easily and inexpensively.
 Sole proprietorships carry little, if any, ongoing formalities.
 A sole proprietor need not pay unemployment tax on himself or herself (although he or she
must pay unemployment tax on employees).
 Owners may freely mix business or personal assets.
 The disadvantages of a sole proprietorship include:
 Owners are subject to unlimited personal liability for the debts, losses and liabilities of the
business.
 Owners cannot raise capital by selling an interest in the business.
 Sole proprietorships rarely survive the death or incapacity of their owners and so do not retain
value.
Partnership

If your business will be owned and operated by several individuals, you'll want to take a
look at structuring your business as a partnership. Partnerships come in two varieties: general
partnerships and limited partnerships. In a general partnership, the partners manage the
company and assume responsibility for the partnership's debts and other obligations. A limited
partnership has both general and limited partners. The general partners own and operate the
business and assume liability for the partnership, while the limited partners serve as investors
only; they have no control over the company and are not subject to the same liabilities as the
general partners.

Unless you expect to have many passive investors, limited partnerships are generally not the
best choice for a new business because of all the required filings and administrative
complexities. If you have two or more partners who want to be actively involved, a general
partnership would be much easier to form.

 Advantages of a partnership include that:

 two heads (or more) are better than one
 your business is easy to establish and start-up costs are low
 more capital is available for the business
 you’ll have greater borrowing capacity
 high-calibre employees can be made partners
 there is opportunity for income splitting, an advantage of particular importance due to resultant
tax savings
 partners’ business affairs are private
 there is limited external regulation
 it’s easy to change your legal structure later if circumstances change.
 Disadvantages of a partnership include that:
 the liability of the partners for the debts of the business is unlimited
 each partner is ‘jointly and severally’ liable for the partnership’s debts; that is, each partner is
liable for their share of the partnership debts as well as being liable for all the debts
 there is a risk of disagreements and friction among partners and management
 each partner is an agent of the partnership and is liable for actions by other partners
 if partners join or leave, you will probably have to value all the partnership assets and this can
be costly.
Corporation

A corporate structure is perhaps the most advantageous way to start a business

because the corporation exists as a separate entity. In general, a corporation has all the legal
rights of an individual, except for the right to vote and certain other limitations. Corporations are
given the right to exist by the state that issues their charter. If you incorporate in one state to
take advantage of liberal corporate laws but do business in another state, you'll have to file for
"qualification" in the state in which you wish to operate the business. There's usually a fee that
must be paid to qualify to do business in a state.

You can incorporate your business by filing articles of incorporation with the appropriate agency
in your state. Usually, only one corporation can have any given name in each state. After
incorporation, stock is issued to the company's shareholders in exchange for the cash or other
assets they transfer to it in return for that stock. Once a year, the shareholders elect the board
of directors, who meet to discuss and guide corporate affairs anywhere from once a month to
once a year.

 The advantages of a corporation are as follows:

 Limited liability. The shareholders of a corporation are only liable up to the amount of their
investments. The corporate entity shields them from any further liability, so their personal
assets are protected.
 Source of capital. A publicly-held corporation in particular can raise substantial amounts by
selling shares or issuing bonds.
 Ownership transfers. It is not especially difficult for a shareholder to sell shares in a corporation,
though this is more difficult when the entity is privately-held.
 Perpetual life. There is no limit to the life of a corporation, since ownership of it can pass
through many generations of investors.
 Pass through. If the corporation is structured as an S corporation, profits and losses are passed
through to the shareholders, so that the corporation does not pay income taxes.
 The disadvantages of a corporation are as follows:
 Double taxation. Depending on the type of corporation, it may pay taxes on its income, after
which shareholders pay taxes on any dividends received, so income can be taxed twice.
 Excessive tax filings. Depending on the kind of corporation, the various types of income and
other taxes that must be paid can require a substantial amount of paperwork. The exception to
this scenario is the S corporation, as noted earlier.
 Independent management. If there are many investors having no clear majority interest, the
management team of a corporation can operate the business without any real oversight from
the owner
Cooperative

Cooperative advertising is a cost-effective way for manufacturers, retailers or distributors

to reach their target markets. Although co-op advertising policies differ from manufacturer to
manufacturer, most will pay a portion of the advertising costs and supply the retailer with photos
or graphics to use in the ad (or sometimes the entire ad itself), whether for print, radio or
television. A manufacturer's contribution to a cooperative advertising campaign can range from
a large amount of money to promotional gimmicks and point-of-purchase displays.

Using co-op advertising cuts down not only on your media costs but also on your ad
production and creative expenses as well. A smart advertiser will factor co-op advertising, if
available, into his or her budget. The major drawback to co-op advertising is that some
manufacturers have more restrictive programs than others.

 Advantages
 Easy Formation
 Limited Liability
 Perpetual Existence
 Social Service
 Open Membership
 Tax Advantage
 State Assistance
 more effective
 Democratic Management
 Disadvantages
 Lack of Secrecy
 Lack of Business Acumen
 Lack of Interest
 Corruption
 Lack of Mutual Interest
 The Nature
and form of
Organizations
(Business ethics and Social Responsibilty)

Angelou Hornillos
12-ABM(ZEUS)
Mrs.Baligat