Business Structures

1. Corporations

1.1. General Characteristics: A legal entity owned by shareholders, profit driven

1.2. Pros: Able to attract investors, stock options, owner protection, structure

1.3. Cons: Time and cost to become a corporation, having to follow corporate formalities, tax liability

1.4. 3 Examples: Coca-Cola, The Walt Disney Company, Nike Inc.

2. S Corporations

2.1. General Characteristics: A type of corporation created through tax election, elects to be treated like a sole proprietorship or partnership for tax purposes

2.2. Pros: Protected assets, pass-through taxation, tax-favorable characterization of income, straightforward transfer of ownership, heightened credibility

2.3. Cons: ongoing expenses, tax qualification obligations, stock ownership restrictions, closer IRS scrutiny

2.4. 3 Examples: Real Estate Agents, CPA's, Attorney's

3. Sole Proprietorship

3.1. General Characteristics: Simplest business form, not a legal entity, refers to the person who owns the business, popular business form

3.2. Pros: : Easy to set up, little cost, taxation is easy, there are little formalities, freely mix business or personal assets, can make financial decisions by themselves

3.3. Cons: Owner is personally liable for any debts, cannot raise capital by selling interest in the business, if the owner dies the business rarely survives

3.4. 3 Examples: Freelancers, Lawn Care Companies, Tutors

4. Partnerships

4.1. General Characteristics: A single business owned by two or more people, every person contributes money, property, labor or their skill, all share in the profits and losses

4.2. Pros: Shared startup costs, shared workload and responsibilities, shared risks, support and motivation

4.3. Cons: Shared profits, shared control, strain on friendships, decisions are shared, joint liability

4.4. 3 Examples: Sam, Jack, Albert & Harry Warner of Warner Bros., Bill Hewlett & David Packard (Hewlett-Packard), Steve Jobs & Steve Wozniak (Apple)