In sole proprietorship form of business, the owner has full control and management of the business. Therefore, decisions regarding the business are made by a single person who is the owner (U.S. Small Business Administration n.d). In partnership, more than one person is involved in the decision-making process. Similarly, the partners develop a legal partnership agreement that encompasses how they should make decisions in the future. Regarding Incorporation (C corporation and S corporation), the board of directors makes decisions since they are the ones managing it.
Raising Capital for Start-up
In a sole proprietorship, the owner contributes all funds required to start the business. A partnership is different since each partner contributes an equal share of capital to start the business. In a situation when they want more capital, they will add new partners (Dlabay, Jim, Brad, and Steven 112). Both a C corporation and S corporation have an advantage regarding raising capital for their business. They both sell their stock to raise capital for the business.
Distribution of Profit (Losses)
In a sole proprietorship, the owner enjoys profits from the business and also suffers in case of loss. Partnership has a different approach to the distribution of profits and losses. Partners in this form of business share profits and losses as specified in their partnership agreement. In a situation when the profits and losses are unspecified, the partners will share them equally (Dlabay, Jim, Brad, and Steven 113). Incorporation also acts differently. Profits and losses in a C corporation belong to the corporation; however, the shareholders might get profits in the form of dividends. For the case of an S corporation, the shareholders enjoy profits and bear the losses in proportion to their shares.
In a sole proprietorship, the owner is responsible for any tax due and he/she is taxed once. For the case of a partnership, the partners in the business are responsible for any tax due and they are taxed once. In a C corporation, the government taxes both the shareholders and the corporation. While in the case of an S corporation, the government taxes the owners of the business.
Dlabay, Les R, Jim Burrow, Brad Kleindl, and Steven A. Eggland. Intro to Business. Mason, OH: South-Western Cengage Learning, 2009. Print.
“U.S. Small Business Administration | The U.S. Small Business Administration | SBA.gov.” U.S. Small Business Administration | The U.S. Small Business Administration | SBA.gov. Web. 28 Feb. 2016.