culled from:lifehack.org
Sole Proprietorship
A sole proprietorship is business owned by a single individual who collects all the profit from it, and maintains all liability for its debt.
Advantages
A sole proprietorship is the simplest and least expensive business to start and operate. Because the owner and the business are one in the same, all of the income and expenses go straight to the owner, who can report them on their personal income tax forms.
Disadvantages
In a sole proprietorship, since there’s legally no difference between the business and the owner, all of the owners’ private possessions are at risk if they are needed to pay the business’s debts.
Partnership
A partnership is business wherein two or more individuals share the management, profit and liability for the company’s debts.
Advantages
Like a sole proprietorship, a partnership is very simple to setup and run.
Disadvantages
Just like a sole proprietorship, the partners assume all liability for the debts incurred by the partnership. In addition, the partners may become deadlocked and unable to cooperate in the running of the business.
Corporation
A corporation is a legally defined type of business in which the business itself is considered a “person” under the law, and is liable for the businesses debts. This relieves the corporations owners of much of their own personal liability.
Advantages
Owners of the coporation, called shareholders, have a limited liability. They risk only their money invested in the corporation. Shareholders can also sell their shares to someone else and end their ownership of the business.
Disadvantages
The primary disadvantage of corporations is the difficulty and expense involved in starting, and to a lesser degree in operating them. Corporations are governed under state laws and must follow very specific rules and procedures for record keeping and reporting.
In addition, in some kinds of corporations, called subchapter C corporations, the corporation pays taxes on the money it earns, and the shareholders pay tax on the dividends the corporation pays out.
Subchapter S corporations and limited liability companies are other kinds of corporation. They are more complex than sole proprietorships and partnerships, but generally less onerous than other corporations to start and operate. They both offer more limits on liabilities than sole proprietorships and partnerships.
Conclusion
You don’t have to incorporate to start a business. Sole proprietorships are the simplest and fastest ways for an individual to get into business. In some locales, you don’t need to do much more than to just start offering your products and services for sales. But, they offer no liability protection. If your widget pollutes the neighborhood, you’re liable, so be careful! And, be sure to check with your local governing agencies for the appropriate regulations in your area.
