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Business Organization & Management

Basic Forms of Business Ownership

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Basic Forms of Business Ownership
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This page will provide a brief overview of the different types of basic forms of business ownership including: corporation, sole proprietorship, and partnership.

Corporations

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A corporation is a legal entity with authority to act and have liability separate from its owners.  They make up 19 percent out of all the basic forms of ownerships.  They account for 89 percent out of all the profits from the basic forms of ownerships.  Some advantages of corporations are more money for investment, limited liability, perpetual life, and size.  Some disadvantages of corporations are expensive initial costs, double taxation, and conflict with the board of directors.  There are two types of corporations, conventional (C) corporations and S corporations.  A S corporation is a unique government creation that looks like a corporation, but is taxed like sole proprietorships and partnerships.  They have the benefit of limited liability, but their profits are taxed as the personal income of the shareholders, thus avoiding the double taxation of C Corporations.  Examples include: Varsity Liquors in Princeton, NJ and Conte Brothers Automotive in Cherryhill, NJ. 

Sole Proprietorship

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A sole proprietorship is a business that is owned and usually managed by one person. This is the most common form of business ownership. Advantages include: being your own boss, leaving a legacy, ease of starting and ending a business. Disadvantages include: limited financial resources, unlimited liability, and overwhelming time commitment. They make up 74 percent of businesses, but only take six percent of all profits. An example of this type of business is The Brunswick Fitness Store in Marlboro, NJ.

Partnerships

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A partnership is a business between two or more people.  It is the least common type of all the basic forms of ownership.  Out of all business it makes the least amount of profits. Advantages include: more financial resources, shared management and knowledge, and longer survival.  Disadvantages include: unlimited liability, division of profits, disagreements among partners and the partnership will be difficult to terminate.  An example of a partnership is Mobile Exchange, which is located in New Brunswick, NJ. 

Ryan Patel
Vikas Goel