Explain why limited liability companies are becoming an increasingly popular form of business ownership.

Explain why limited liability companies are becoming an increasingly popular form of business ownership.

- There is limited liability.

- There is tax pass-through. Earnings "pass through" the company and are taxed only as income of the owners. This eliminates the double taxation of profits that is endemic to general corporations.

- There is simplicity and flexibility in management and operation.

- There is flexible ownership.

Explain why corporations have become the dominant form of business ownership.

Explain why corporations have become the dominant form of business ownership.

Corporation have become the dominant form of business ownership because they are legal entities that stand apart from the owners

Evaluate the pros and cons of the partnership as a form of business ownership.

Evaluate the pros and cons of the partnership as a form of business ownership.

Pros of the partnership as a form of business ownership:

- Ability to pool financial resources: With more owners investing in the company, a partnership is likely to have a stronger financial base than a sole proprietorship.

- Ability to share responsibilities and capitalize on complementary skills: Partners can share the burden of running the business, which can ease the workload.

- Ease of formation: Forming a partnership is easy.

- Possible tax advantages: The earnings of a partnership are untouched by the IRS and are taxed only as the partners' personal income.

Cons of the partnership as a form of business ownership:

- Unlimited liability: As a general partner, you're not only liable for your own mistakes, but also for those of your partner's.

- Potential for disagreements: If general partners can't agree on how to run the business, the conflict can complicate and delay decision making.

- Lack of community: If a current partner withdraws from the partnership, the relationships among the participants will clearly change, potentially ending the partnership.

Describe the characteristics of the four basic forms of business ownership.

The characteristics of the four basic forms of business ownership are described below :

1. A sole proprietorship is a business that is owned, and usually managed by a single individual.


2. A partnership is a voluntary agreement under which two or more people act as co-owners of a business for profit. In its most basic form, known as a general partnership, each partner has the right to participate in the company's management and share in profits- but also has unlimited liability for any debts the company incurs.


3. A corporation is a business entity created by filling a form(known in most states as the articles of incorporation) with the appropriate state agency, paying the state's incorporation fees, and meeting other requirements.

A corporation is considered to be a legal entity that is separate and distinct from its owners. Because of a corporation's status as a separate legal entity, the owners of a corporation have limited liability- meaning they aren't personally responsible for the debts and obligations of their company.


4. A limited liability company(LLC) is a hybrid form of business ownership that is similar in some respects to a corporation while having other characteristics that are similar to a partnership.

Like a corporation, a limited liability company is considered a legal entity separate from its owners. Also like a corporation, an LLC offers its owners limited liability for the debts of their business.