Title: Compare the advantages and disadvantages of different business entities.
Course: Entrepreneurship, Advanced (12053-II) > Section: Understanding Business Management Concepts

Comparison should include following legal guidelines in the establishment of a

- sole proprietorship—owned by one person
- partnership (both general and limited)—owned by a small group of people, usually two or three
- corporation—owned by a number of people and operated under written permission from the state, with a separate legal personality from its owners
- limited liability company (LLC)—a hybrid form of business that has characteristics of both a corporation and a partnership
- limited liability partnership (LLP)—allows partners to enjoy limited personal liability, while general partners have unlimited liability
- S-corporation—meets specific Internal Revenue Code requirements, which gives a corporation with 100 or fewer employees the benefit of incorporation while being taxed as a partnership
- franchise—business opportunity that allows the franchisee to start a business by legally using someone else’s (i.e., the franchisor’s) expertise, ideas, and processes
- nonprofit corporation—formed to carry out a charitable, educational, religious, literary, or scientific purpose; does not pay federal or state income taxes from activities in which it engages to carry out its objectives
- cooperative—an association of persons united voluntarily to meet common economic, social, and cultural needs and aspirations through a jointly owned and democratically controlled enterprise.

Process/Skill Questions:

- How does a partnership make up for the shortcomings of a sole proprietorship?
- What are the liabilities of each type of ownership?
- What are the benefits/drawbacks of each type of ownership?
- What are local examples of each type of ownership?
- Because of the shared liability in a partnership, what are qualities to look for in a partner?
- What are the reasons for choosing the corporate form?
- What are the characteristics of a limited liability company?
- Who can benefit from a sole proprietorship vs. LLC or corporation?
- What are common jobs that use sole proprietorships?
- Where does a person seek information on where to set up a small business?