Choose the Form of Business Ownership that Will Work Best For You

Choose the form of business ownership that will work best for you. This decision will be made with the advice of both your accountant and lawyer. In the conduct of your business quite often you will be working with both your accountant and lawyer. Therefore, you should be certain that these two individuals can work well together.

Three Major Forms of Private Ownership:

Sole Proprietorship-- (One Owner)
Liability: Unlimited personal liability for businesds debt
Advantages: Owner retains all profits
Easy to form and dissolve
Owner has flexibility
Disadvantages: Unlimited financial liability
Financing limitations
Management deficiencies
Lack of continuity

Partnership--(Two or more owners)
Liability: Personal assets of any operating partner at risk from creditors.
Advantages: Easy to form
Can benefit from complementary management skills
Expanded financial capacity
Disadvantages: Unlimited financial liability
Interpersonal conflicts*
Lack of continuity
Difficvult to dissolve

Corporation--(Unlimited number of owners)
Liability: Limited
Advantages: Limited financial liability
Specialized management skills
Expanded financial capacity
Economics of large-scale operations
Disadvantages: Difficult and costly to form and dissolve
Tax disadvantages
Legal restrictions

This chart is from the textbook--"Contempory Business" by Boone & Kurtz, Chapter 5

*Special note on partnerships--
Quite often in salon business, the business partners are close friends and/or relatives. While there are advantages in that you all get along well, there can be disadvanages. It is imperative that a partnership agreement be made up defining each individual's roles and responsibilities. You will want to review this regularly.