Sole Proprietorship Sole Proprietorship is a form of business owned and controlled by a single individual. There is no legal difference connecting the owner and the business. The business belongs to the one individual with no shareholders. The owner collects all profits and has complete accountability for all losses and debts. A woman has decided to open a home daycare where she will keep up to six small children under the age of six. The woman operates her business out of her home and is the only worker. She is responsible for the care of the children, providing meals, learning equipment, paying all utilities such as water and lights, and insurance to cover the business. The woman collects all payments and is responsible for having the utensils to provide service to the children. The home daycare is an example of a sole proprietorship. “Sole proprietorships are the most common form of business organization in the United States” (Cheeseman, 2010).
A partnership entails of two or more individuals who share the personal liability for the company’s debts and obligations. In a partnership all individuals split the profits earned by the company along with all debts and responsibilities of the company. Two brothers open an auto shop in their local community. The auto shop fixes wrecked vehicles, oil changes, inspections, and tires. The brothers share all the responsibilities of the business such as ordering parts, fixing vehicles, paying suppliers for parts, utilities, handling customers, and the up keep of the company. The brothers share the personal liability for the company’s debts and obligations. The profits of the company are split by the brothers after all bills are paid. The brother’s auto shop is an example of a partnership.
Limited Liability Partnership Limited liability partnership is a partnership when only a few or all partners have limited liability. Limited liability is when an individual is not held responsible for the company. Limited liability partnerships have qualities of partnerships and corporations. In a limited liability partnership one individual or partner is not responsible or accountable for another individual’s delinquency or negligence. “Limited partners invest capital but do not participate in management and are not personally liable for partnership debts beyond their capital contributions” (Cheeseman, 2010). An individual opens a bakery in town that becomes busier than she expected. She realizes she needs help with the bakery but does not want any individuals making business decisions. The owner of the company has another partner come into the company to help with the debts and productivity. The new partner does not make any business decisions or change the operations. The bakery faces bankrupt but the new partner does not have any obligations to debts. The bakery is an example of a Limited liability partnership.
S corporations do not pay any federal income taxes for the company. S corporation’s profits or losses are separated between and passed to the shareholders of the company. The shareholders report the profit they make from the company and the loss of the company on their own individual income tax returns. Goodyear is a tire company in Fayetteville, North Carolina. “Almost 20,000 investors directly own Goodyear common stock, which is traded on the NASDAQ Global Select Market (symbol GT)” (Goodyear, 2012). Goodyear Tire Company has many facilities around the country, multiple employees, and shareholders. Goodyear is a S corporation that