Thu, August 22, 2019

Types of Business

There are many types of business, but the three most basic are:

  • Sole proprietor
  • Partnership
  • Corporation

 

Each of these haves pros and cons and work well in different situations.  For example, the sole proprietor is the cheapest to start, but the partnership and the corporation shared blame if sued.

Sole proprietor is the cheapest and easiest business to start. You have all the power and nobody can tell you what to do.  Another bonus is that of the all profit is given to you to either reinvest or keep.    Unfortunately, if you can’t work for whatever reason the business dies. And you are 100% liable.  That means that if you have a restaurant and someone gets food poisoning, they sue you directly.  All of the money they sue for is paid by you.

Partnerships are the next step for most people.  You can have as many partners as you like and everyone usually has equal rank in a partnership. You should have a plan to see how it is going to be organized. like who is going to be in charge of what. Organization is essential in a partnership. A pro is that receiving funds is probably a lot easier with two or more. You’ll probably attract employees with the option of becoming a partner. And if you have complementary skills (Ex. author and an editor) you’ll have a more rounded and successful business. A bad thing is that you have someone in equal authority and you should consult  decisions with them.  You also need to be aware that if you don’t get along, teh business can not survive.  So, be careful who you choose for a partner because you are jointly and personally responsible for any and all business decisions whether you make them or your partners makes them. 

Corporations are the most complicated to start, but may be the safest.   This is where stocks come from: corporate stocks.  You have probably even heard the term “corporate takeovers,” as well.  A corporation is it’s own thing.  Everything, taxes, lawsuits and all go through the company and not the people.  To start one, you switch all of your company’s banking info and EIN.  Those who own stocks are ‘owners’ in the company.  If you want to be boss, you need to have the most stocks, “controlling interest.”   Fortunately the liability is split and your assets (what you own), are protected, but this is not entirely true since some companies require a personal guarantee. It can be costly to start and involves a lot of legal paperwork.  Sometimes it’s worth it.

(article written by Tyloid)

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1 Comment to “Types of Business”

  1. J-Rod says:

    Serious advantages for all of them. I wonder how a teen would go about starting a corporation

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