6.3 Forms of Ownership
An entrepreneur must give thought to the legal form a business will take. There are pros and cons to the different forms and selecting the right form is important.
| Form | Advantages | Disadvantages |
| Sole proprietorship | Easy to create | Unlimited liability Limited skills Limited financial resources |
| Partnership | Easy to create Additional skills Additional financing |
Unlimited liability |
| Limited Liability Company, LLC | Limited liability Easy to create |
Limited in the number of members (owners) |
| Corporation, Inc. | Limited liability Unlimited number of owners Additional sources of financing |
Double taxation More regulation and overhead. |
Unlimited liability is where one or more of the business’s owners are personally responsible for the business’s debts and tax obligations.
Limited liability restricts the responsibility for debts and taxes to the business itself, not its owners.
Double taxation occurs in a corporation because the owners first pay taxes when a corporation pays taxes on its earnings. The owners then pay taxes again when the profits are distributed to them as dividends.
