1. Sole Proprietorship
Sole proprietorship is the simplest form of business organizations. There is no separate legal entity, so earnings and losses are reported onthe sole proprietorship personal income tax filing. In this form of business the proprietor has the right to make all management decisions and the right to receive all business profits. Soleproprietorships are easy to transfer or sell. The mayor disadvantage of this form is that a sole proprietor capital is limited to personal funds and any loans that he or she can acquire; in addition, it isliable for business contracts and the torts of the employees may commit by working for the sole proprietorship. This form of business posses unlimited liability; in consequence, creditors may recoverclaims against the business from the proprietor personal assets.
2. General Partnership
A general partnership is a voluntary association of two or more persons to create profits. There should bean agreement that establish the rights and duties of the members. Members also known as partners are personal liable for the debts and obligations of the general partnership. General partnerships donot pay taxes; instead, the income or losses are reported on each member personal taxes returns. Partners are liable jointly and severally liable for torts and breaches; including partners that did notparticipate on the act.
3. Limited Partnership
This kind of business has two types of partners: general and limited partners. General partners are the ones that invest money and participate onthe day to day activities of the business. This type of partners are personal liable for the partnership debts. On the contrary, limited partners just invest money and do not participate on themanagement of the company. Limited partners are not personal liable for the partnership debts beyond their capital contribution. Although is not required but law, limited partnerships draft and execute a...