Determine whether each characteristic describes a sole proprietorship, a general proprietorship, or a corporation. Note that a characteristic may apply to more than one type of business structure.
There is unlimited liability.
There are 2 or more owners.
There is 1 owner.
Stocks may be issued to generate income.
There is unlimited liability: Sole proprietorship, General partnership, Corporation
There are 2 or more owners: General partnership, Corporation
There is 1 owner: Sole proprietorship
Stocks may be issued to generate income: Corporation
- There is unlimited liability: This characteristic applies to both sole proprietorships and general partnerships, where the owners are personally liable for the business debts and obligations.
- There are 2 or more owners: This characteristic applies to a general partnership, where there are multiple owners sharing the responsibility and profits of the business.
- There is 1 owner: This characteristic applies to a sole proprietorship, where there is only one owner who is solely responsible for the business.
- Stocks may be issued to generate income: This characteristic applies to a corporation, where stocks can be issued to raise capital and generate income for the company.
To determine whether each characteristic describes a sole proprietorship, a general partnership, or a corporation, we need to understand the definitions of these business structures.
1. Unlimited Liability: This characteristic is typically associated with both sole proprietorships and general partnerships. In a sole proprietorship, the owner is personally liable for all debts and liabilities of the business. Similarly, in a general partnership, each partner has unlimited liability for the partnership's obligations.
2. 2 or More Owners: This characteristic is specific to a general partnership. A general partnership requires at least two owners who share ownership, control, and responsibility for the business.
3. 1 Owner: This characteristic is specific to a sole proprietorship. A sole proprietorship is a business owned and managed by a single individual, who has complete control and is solely responsible for the business's operations and liabilities.
4. Stocks may be issued to generate income: This characteristic is associated with corporations. Corporations are able to issue stocks or shares of ownership to raise capital and generate income. Shareholders own the corporation and have limited liability.
Based on these definitions, we can match the characteristics to the respective business structures:
- Unlimited Liability: Sole Proprietorship and General Partnership
- 2 or More Owners: General Partnership
- 1 Owner: Sole Proprietorship
- Stocks may be issued to generate income: Corporation