Description of Business Entities

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Business entities Q1. Sole proprietorship: With a sole proprietorship, the entity owner is personally responsible for all of the organization's actions, including the financial obligations of the entity. The advantage is that the profits of the organization are not 'taxed twice' as part of the requirements of the entity. The disadvantage is that the owner can lose his or her personal assets if the organization is in debt or has legal problems. General partnership: Under a general partnership, the owners of the business share equally in the responsibilities of the business and are equally liable for the obligations of the organization. The profits may be divided equally on a 50-50 basis between the partners, or in accordance with the original agreement contracted when the business was set up (General partnership, 2012, Quick MBA). Depending on the state, the partners may be jointly liable for one another's debts, which means if one partner is liable for a financial obligation and cannot pay the debt; the other partner is liable for the debts of the partner (General partnership, 2012, Quick MBA). Other states merely have several liability, meaning that the partners are individually liable for their debts that they gain over the course of doing business, but not personally liable for the partner's debts (General partnership, 2012, Quick MBA). LP: A limited partnership divides the legal obligations of partnership. The general partner has unlimited liability, just as if he
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