Forms of Business Ownership
Review this overview of the various forms of business ownership, including advantages and disadvantages, to learn about some of the factors that go into deciding which form is best for any given situation. No hard and fast formula helps an entrepreneur pick the proper form. However, there are some important considerations, such as risk, taxes, transferability, and even image. After you read, complete the concept check questions about the different types of business structures: sole proprietorship, partnership, and corporations.
Corporations: Limiting Your Liability
The Incorporation Process
Setting up a corporation is more complex than starting a sole proprietorship or partnership. Most states base their laws for chartering corporations on the Model Business Corporation Act of the American Bar Association, although registration procedures, fees, taxes, and laws that regulate corporations vary from state to state.
- Selecting the company’s name
- Writing the articles of incorporation (see Table 4.3) and filing them with the appropriate state office, usually the secretary of state
- Paying required fees and taxes
- Holding an organizational meeting
- Adopting bylaws, electing directors, and passing the first operating resolutions
The state issues a corporate charter based on information in the articles of incorporation. Once the corporation has its charter, it holds an organizational meeting to adopt bylaws, elect directors, and pass initial operating resolutions. Bylaws provide legal and managerial guidelines for operating the firm.
| Articles of Incorporation |
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Articles of incorporation are prepared on a form authorized or supplied by the state of incorporation. Although they may vary slightly from state to state, all articles of incorporation include the following key items:
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