Forms of Business

Sole proprietorship, partnership and corporation are the three forms of business. Accounting process is different on each of the form of business.

Sole Proprietorship

This form of business may also be called "single proprietorship" or simply "proprietorship". This form of business is usually a small type of business. It is owned by a single person who usually runs the business. The owner of the business control and owns all the assets and receives all the profits but also absorbs all the losses and responsible for all the liabilities that the business may incur. 

Partnership

This business is owned by two or more persons who bind themselves to contribute money, property or industry to a common fund. Profit is divided among the partners and each of the partner is liable for the liabilities of the partnership (only if it is pure general partnership). 

Corporation

This is a big type of business which is why it is difficult to create, organize and manage. This business is owned by "stockholders". It is created under the law and is a separate legal entity. Stockholders are not liable for the liabilities of the corporation. Stockholders are only liable up to the amount of  his/her investment. Personal belongings of the stockholders can not be used to settle the corporation's debts.