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) |
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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 |
- Subchapter reflects distinctions in the federal
tax code
- 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.
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