Business Structure and Types

Study Notes

Business structure refers to the legally recognized organization framework of a business entity within a particular jurisdiction.
It determines the legal, tax, and financial responsibilities of the business.

A business owned and operated by a single individual.
Advantages:
- Simple to establish and operate.
- Complete control by the owner.
- Direct tax benefits as profits are taxed as personal income.
Disadvantages:
- Unlimited personal liability.
- Difficulty in raising capital.
- Business continuity issues upon the owner's death or incapacitation.

General Partnership: Partners share equal responsibility and liability.
Limited Partnership: Includes both general and limited partners, with limited partners having restricted liability.
Advantages:
- Combined resources and expertise.
- Shared decision-making and risk.
- Direct tax benefits as profits are taxed as personal income.
Disadvantages:
- Joint liability for general partners.
- Potential for conflicts between partners.
- Complicated dissolution process.

A legal entity separate from its owners, offering limited liability.
Advantages:
- Limited liability for shareholders.
- Easier to raise capital through stock sales.
- Perpetual existence.
Disadvantages:
- More complex and expensive to establish.
- Extensive record-keeping and regulatory requirements.

Combines the benefits of a corporation and partnership.
Advantages:
- Limited liability for owners.
- Flexible tax options.
- Fewer regulations compared to corporations.
Disadvantages:
- More expensive to form than a sole proprietorship or partnership.
- Varying regulations by state/country.