Business Organizations

Types of Business Organizations
This information came from the State of New Jersey’s Web site.
Check with your accountant, lawyer or small business advisor for the most current information or changes to the tax law for this type of business organization.

There are three most commonly used business organizations: Sole Proprietorship, Partnership and Corporation. Here are the advantages and disadvantages of each.

	Advantages	Disadvantages
Sole Proprietorship	- Low start-up costs - Greatest freedom from regulation - Direct control by owner - Minimum working capital requirements - Tax advantage to small owner - All profits to owner	- Unlimited personal liability - Lack of continuity - More difficult to raise capital
Partnership	- Ease of formation - Low start-up costs - Additional sources of venture capital - Broader management - Limited outside regulation	- Unlimited personal liability - Lack of continuity - Divided authority - Difficulty in raising additional capital - Hard to find suitable partners
Corporation	- Limited liability - Specialized management - Ownership is transferable - Continuous existence - Legal entity - Easier to raise capital - Unity of action account having centralized authority in board of directors	- Closely regulated - Most expensive to organize - Charter restrictions - Extensive record-keeping necessary - Double taxation, except when organized as an "S Corporation" - Difficult to liquidate investment