Paper Example on Characteristic of Sole Proprietorship General Partnership Corporation Joint Venture Franchise

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Vanderbilt University
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Liability Exposure In a sole proprietorship, the proprietor is exposed to personal liability. Therefore, he or she carries the burden of losses suffered by his or her business alone. It has no liability protection. There is potential exposure to liability of both individuals and businesss asset All of the owners of such a business have limited individual liability for the debts of the business. Protects against personal liability for business debts and obligations of the business.

They limit the member's liability for actions taken on behalf of the enterprise. Each party may be held liable for the negligence of other members. Franchisors are always exposed to vicarious liability for the tortious conduct of their franchisees

Tax Exposure In a sole proprietorship, all profits are reported as personal income and taxed at the personal tax rates. No payment of tax, but the partners pay income tax. The co-owners are taxed based on their share of the business profits and losses. One-member LLCs owned by many people are taxed as sole proprietorships Corporations are taxed as entities and, also, shareholders are taxed on distributions. Taxed as either a corporation or partnership. When taxed as corporations, they undergo double taxation (at the corporate and shareholder levels). The tax exposure faced by a franchisor comprises of the valuation of his or her tangible personal property

Owners Relationship There is a single owner in this form of business. The multiple owners carry on business for profit. Every member is an agent of the business The members are tasked with the responsibility of setting up the requirements for membership and conditions for removal or transfer member's ownership interest. The ownership depends on the relationship between internal and external assets, internal and external corporate assets

(Kaptein & Wempe, 2002). Shared ownership, shared governance, and shared returns and risks between or among parties. The core of a franchise relationship is a trademark license.

Purpose of Form The primary objective is to reap profit for self. Profit-making enterprise created and run by two or more people who serve as partners and co-owners of the business. For profit-making businesses (Crossley-Stanbury, 2010). Protects the members assets from business liability. Maximizing profits for shareholders. Pooling of resource and expertise of more than one company (Gupta, 2007). Marketing of a product or service.

Example A local grocery. Surgeons working together to provide surgical specialties. Partnership between lawyers. Chrysler LLC. General Electric Toshiba and Western Digital McDonalds


Crossley-Stanbury, J. (2010). How to Become a Magazine Publisher - Create Your Own Magazine. England: Infona.

Gupta. (2007). Business Studies Xi 6E. New Delhi: Tata McGraw-Hill Education.

Kaptein, M., & Wempe, J. F. D. B. (2002). The Balanced Company: A Theory of Corporate Integrity. Oxford: Oxford University Press.

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