Terms:
- Stockholder: holder of a company’s share
- Creditor: lender to a company, charges interest
- Dividend: money earned in form of cash
- Internal decision maker: managers
- External decision makers: stockholders and creditors
Types of Business entities:
- Most common:
- Sole proprietorships
- Partnerships
- Corporations
| Most common forms | Sole proprietorship | Partnership | Corporation |
|---|---|---|---|
| Ad | - easiest to create - easiest to dissolve - right to all profit | - more equity and expertise - limited liability for some owners | - protects personal asset - no shareholder liability - easiest to change ownership - greated source of fund |
| dis | - unlimited liabilities - Equity from 1 owner or business profit - Taxed once (business, personal) - difficult to transfer ownership | - shared control - shared profit - harder to dissolve | - difficult & expensive to establish - dilute individual control - taxed twice |
- A limited liability partnership (LLP). An LLP combines some of the limited liability characteristics of a corporation with the tax advantage of a partnership
- limited liability company (LLC). LLCs also provide limited liability to the people who make the business decisions in the firm while enabling all investors to retain the flow-through tax advantages of a limited partnership