Business• Business Consulting• Business Motivation• Forms of business

Pros & Cons of The 7 Forms of Business Ownership (Table)

7 forms of business ownership blog image
Starting a business? There are a few different forms of business ownership to consider when starting up. No matter what you are going to offer, the first step is to start! The following table covers the basic business types depending on your industry. It is important to consider the characteristics of liability and tax exposure prior to jumping in.

The following is the highlight of each that stands out and a detailed table.

Sole Proprietorship

sole proprietorship
Pro: Complete control of all company decisions. This is great for companies that are at low risk for legal liability such as a digital goods marketing agency. Complete control is awarded to the owner/operator.

Con: All liability falls on the owner, leaving their assets vulnerable to attack. The owner is also responsible for everything from taking phone calls, performing the work, keeping books and paying taxes. The load is a lot to handle when growth starts to take shape.

General Partnership

general partnership
Pro: Brings together a group of ambitious people, promoting business success. This is amazing if you work well with like-minded people. The better talent that you are surrounded with can help cultivate the perfect environment for success.

Con: Business decisions as well as profits are split down the middle. Trust will go a long way when deciding to form a general partnership. Be sure to know your partner well before signing the dotted line.

Limited Liability Partnership (LLP)

llp
Pro: Unlimited liability is split across the multiple owners, not just sole liability.

Con: One mistake or shortcoming by one owner can negatively impact the entire team.

Limited Liability Corporation (LLC)

llc
This one of the most common forms of business ownership. This protects personal assets among individual owner(s).

Corporation

corporation blog post
Corporations are subjected to public trading options which shareholders could either benefit from or lose out on. One major con is corporations are double-taxed, the only form of business ownership where this applies.

Joint Venture

joint venture
Joint ventures are good for sharing success. Through effect assets and efforts, financial gain can be shared and enjoyed across the team.

Franchise

franchise
Company liabilities do not fall in the lap of the franchise owner. The owner must abide by the companies decisions relating to renovations, promotions and other marketing and business-related decisions. The franchise is branded and owned as a whole not by the franchise owner.

CharacteristicSole ProprietorshipGeneral PartnershipLLPLLCCorporationJoint VentureFranchise
Liability ExposurePro: Complete control of all company decisions   Con: All liability falls upon the owner. Personal assets become at riskPro: unlimited liability splits among multiple owners, not just sole liability   Con: One mistake by one of the owners impacts the otherPro: Unlimited liability splits among multiple owners, not just sole liability   Con: One mistake by one of the owners impacts the otherPro: Members are not liable for company debts   Con: Under special circumstances, owners can be subjected to unlimited liabilityPro: Limited liability, shareholders are not personally responsible for obligations of the corporation   Con: Shareholders lose investment moneyPro: Unlimited liability splits among multiple owners, not just sole liability   Con: One mistake by one of the owners impacts the otherPro: Owner is not liable for company liabilities   Con: Owner has to abide to all the franchisers decisions such as renovations
Tax ExposurePro: Taxed oncePro: Taxed oncePro: Taxed OncePro: Taxed oncePro: None   Con: Double taxPro: Taxed OncePro: Taxed Once   Con: Royalty and advertising fees in addition to income tax
Owners RelationshipPro: Owner is his or her own boss   Con: Stress can overwhelm an individual when the business depends on their decisions and actionsPro: Brings together a group of talented people, boosting business success   Con: Business decisions and profits are splitPro: Partnership offers limited liability, easing tension among ownership   Con: Profits are spread amongst all membersPro: Fair distribution of profits among business partners   Con: Liability is not inherited by one sole member Pro: Management may focus more on career development than company gain   Con: Shareholders can easily take more interest in profits than employee well-beingPro: Establish good relationships with other successful owners and partners   Con: Profits are spread amongst ownersPro: Opportunity to run an established business as an owner   Con: Products and regulations rules are handed down from corporate 
Purpose of FormGives individuals opportunity to own and operate their own businessCombines the ideas and skillsets of multiple individuals to maximize successCreate a partnership while limiting liabilityTo limit liability among members, while offering fair profit distribution amongst the partnership. Offer portions of ownership to shareholdersTo explore financial gain through combining assets and effortsTo offer potential owners a chance to own a successful, well-established business
ExampleSmall home healthcare providerSmall, middle or large sized medical practiceSmall, middle or large sized Accounting firmMid-sized product manufacturerLarge clothing manufacturerLarge vehicle retailerLarge fast food company
Forms of business ownership and related characteristics
Ronnie Lee Roberts II is a brand and marketing super fan and owner & operator of Roberts Consulting Firm. He identifies the strengths of businesses of all sizes and is a curator of their message to current and future customers. He writes about marketing, leadership and business while offering an arsenal of digital marketing services in the United States.

Questions or Comments? Drop Them Here!

Leave a Reply

Your email address will not be published. Required fields are marked *

Subscribe!

Enter your email address to subscribe to this blog and receive notifications of new posts by email. Thanks!

Join 2 other subscribers