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University of Wisconsin
Center for Cooperatives
230 Taylor Hall
427 Lorch Street
Madison, WI 53706
Phone: 608-262-3981
Email: reynolds@aae.wisc.edu

 

Different types of Business Organizations:

The following chart developed by Kim Zeuli at the University of Wisconsin Center for Cooperatives outlines the different types of business structures that exist today.

Comparison of Business Models in the United States
Created by Kim Zeuli, Assistant Professor, Agricultural and Applied Economics, University of Wisconsin - Madison (2003)

       

Corporations1

  Proprietorship Partnership LLC Subchapter S Subchapter C
(IOF)
Cooperative
(Subchapter T)
Who are the owners? Individual proprietor General & limited partners2 Usually 2 or more individuals, but can have one. Minimum of 2 individuals; maximum of 75 Stockholders (general public & other businesses) User-members (can be other businesses); minimum of 5 members in WI
How is ownership transferred? Privately negotiated Privately negotiated; current voting partners usually must approve new partners (depends on contractual agreement) Privately negotiated; current members usually must approve new members (depends on bylaws) Privately negotiated; may require corporate approval Privately negotiated or publicly traded; if public--open to anyone with enough money to buy stock; otherwise may require board approval Usually highly restricted; transfers to other members not typical; ownership shares usually purchased back by co-op & new members subject to board approval (depends on bylaws)
What is an individual owner's legal liability? Unlimited General = unlimited

Limited = limited
Limited
Limited
Who controls/ governs the business? Owner The partners as a whole. No board of directors; less formal The members as a whole. No board of directors; less formal
Board of directors elected by a majority vote of the owners. More formal than partnership or LLC.
Who receives profits? Owner Partners in proportion to investment or agreement members in proportion to investment or agreement Stockholders in proportion to investment (stock) Stockholders in proportion to investment (stock) & officers as bonus compensation Members in proportion to their use (patronage)
Is investment limited? Only the owner invests in the business Anyone can invest & become a member (subject to approval) Anyone can invest & become a member (subject to approval Anyone can invest (subject to approval) Anyone can invest Typically limited to those who use the cooperative although some non-voting shares can be sold to non-users (outside investors)
What earnings are possible on invested capital? Unlimited Unlimited Unlimited Unlimited Unlimited Limited by law in most states; usually at 8%
Who pays income taxes? Owner at individual rates (single taxation) Partners at individual rates (single taxation) Members at individual rates (single taxation) Individuals at individual rates (single taxation0 Corporation pays at corporate rate; stockholders pay at individual rates (double taxation) When profits are distributed to members, members pay individual rates (single taxation); cooperative only pays corporate tax on profits derived from non-member business
How difficult is it to get started? Easy with low legal and administrative costs; very common Easy with low legal and administrative costs; very common Relatively easy and moderate legal and administrative costs; not as common as other organizations
More complicated and costly than partnerships or LLC; co-op requires knowledgeable legal and financial consultants which might be more difficult to find
  1. Subchapter reflects distinctions in the federal tax code
  2. A limited partnership may have one or more general partners and one or more limited partners; limited partners are generally restricted from participating in management.