There are three main legal forms of business structure.
You are advised to consult a professional accountant and/or lawyer
before selecting a legal business form that's right for you.
SUMMARY:
Below charts several advantages and disadvantages of each legal business
form.
| Factors to Consider | Sole Proprietor | Partnership | Corporation |
| Legal Formalities | simple & fast | more complex | more complex |
| Cost to Obtain | low | medium to high | medium to high |
| Ownership of Assets | one owner (total) | partners (limited to their contribution) | shareholders (limited to # of shares) |
| Financial Responsibility | unlimited | unlimited | limited to shareholder's investment |
| Control | one owner | shared between partners | shareholders (vote per share) |
| Initial Investment | owner's investment | pooled investment of partners | according to the # of shareholders |
| External Financing | Limited to owners borrowing capacity | Limited to partners borrowing capacity | stock & bond issues; debt capacity |
| Tax Implications (1) | taxed at owner's tax rate | partner's tax rate on their share of profits | low rate on company income, but dividends paid to shareholders are taxable. |
| Tax Implications (2) | losses deductible from owner's taxable income | losses deductible from income of partners | losses deductible from taxable company income |