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Chapter 21: Q. 5 (page 465)

Write a brief explanation of the differences among a sole proprietorship, a partnership, and a corporation. In addition, list one advantage and one disadvantage of a proprietorship, a partnership, and a corporation.

Short Answer

Expert verified

A sole proprietorship is one person's business. Two or more people operate a partnership.

The stockholders run a corporation.

Corporations are not exempt from paying taxes. Corporate owners may be subject to limited liability. This is not something a sole proprietor or partner can accomplish.

Step by step solution

01

Introduction

A single-person business is known as a sole proprietorship. A partnership is a firm in which two or more persons own and operate it.

A corporation is a legal entity owned and governed by shareholders who share in the earnings of the company.

02

Explanation

For solo proprietors and partnerships, there are some tax benefits. Corporations are not exempt from paying taxes. Corporate owners may be subject to limited liability. This is not something a sole proprietor or partner can accomplish.

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