Sole Proprietorship

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Sole Proprietorship


Lecture number:
9
Pages:
2
Type:
Lecture Note
School:
University of Texas at Austin
Course:
Fin 320f - Foundations of Finance
Edition:
1

Unformatted text preview:

Lecture 9 Outline of Current Lecture -Sole proprietorship -Partnership -Corporation Current Lecture  Sole proprietorship  Sole proprietorships are the most common form  A sole proprietorship is owned by one person— the proprietor  The goals of the proprietorship are as varied as the proprietors themselves  Pros:  Easy to create—just hang out your shingle  Few regulations  Taxed like an individual  Cons:  Unlimited personal liability  Difficult to obtain capital  Hard to transfer ownership; illiquid  The business dies with the proprietor  Partnership  A partnership (also called a general partnership) is a business shared by two or more owners  The goals of partnerships are as varied as those for sole proprietorships  Pros (same as for sole proprietorship)  Easy to create  Few regulations  Taxed like an individual  Cons:  Unlimited personal liability for partners  Difficult to obtain capital  Hard to transfer ownership; illiquid  The business dies with the partners  LP stands for Limited Partnership  “Limited” partners have limited liability, but no control over the firm’s operations  “General” partners have control, but unlimited liability  LPs are popular for risky businesses: oil drilling, mining, real estate  Corporation  Corporations earn the most revenue  A corporation is a separate and distinct legal entity chartered by the state  What is the goal of a corporation? FIN 320F



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