1 compare and contrast sole proprietorships, partnerships and corporation. In your essay describe each of these forms of business ownership (and compare them). And, provide three advantages of each based on text and class lectures.
Most business is uncomplicated, owner-operated operations, or what are known formally as sole proprietorships. The owner or manager takes all the responsible for liabilities incurred by the organization and has control over its actin. Advantages of a sole proprietorship:
A sole proprietor completely control and decision-making power over business. *
Sale or transfer can take place at the discretion of the sole proprietor. *
There are no corporate tax payments for a sole proprietorship. Disadvantage of a sole proprietorship:
The sole proprietor of the business held personally liable for the debts and obligations of the business. *
Additionally, this risk extends to any liabilities incurred as a result of acts committed by employees of the company. *
All responsibilities and business decisions fall on the shoulders of the sole proprietor. Partnerships are business owned by two or more people who share responsibilities. The extra people can lead to easier to find funds and to do the work of the firm. No written agreement is needed to set up a partnership, though often the partners do write an agreement tailored to their particular needs. Partnerships are the most common business from in professions, such as accounting, law, and medicine. Advantages of Partnership:
1.Easy formation: partnership has very simply and easy formation. The agreement among the partners either in oral or written words can bring a partnership into existence. 2. Partnerships create large resources: A partnership is in a position to absorb huger resources than one contributes capital. The additional financial strength of the partners can increase the scale of operation of the business. 3.Sharing of risk: the partners share the losses of the firm and other associated risk in business. More, the share of risk of each partner is less in comparison to sole proprietorship. Disadvantages of Partnership:
Even though, partnership form of business is better than sole proprietorship form of business, however, still it is not the only best option available for an entrepreneur. The following are some of the important shortcomings of partnership form of organization which must b carefully studies before finalization of this form of business. 1. Limited capital: there is a maximum member that limited in a partnership. Therefore; the raised of capital would be limited too. According to the maximum memberships on a partnership, the large-scale business would be inconvenience to raise capital. 2. Unlimited liability: unlimited liability is an important drawback of partnership. The risk of loss of private property of the partnership influences the partners to avoid further risk and play safe. 3.Risk of implied authority: A partner acts as an agent of the firm and his acts bind the firm and other partners. A dishonest or incompetent partner may lead the firm in difficulties because the other partners shall have to pay for the dishonesty or inefficiency to another partner. Corporation is simply a firm created by government charter. The charter licenses the corporation to exist and lays down the basis rules of its existence. Advantages of corporation:
1. Corporations can obtain more capital through the sale of their actions. *
2. A corporation can deduct the cost of benefits that offers to its *
Managers and employees.
3. This selection allows that the company is subject to a payment of taxes similar to *
that of a society.
Disadvantages of a Corporation:
1.The process of integration requires more time and money to compare to other models of organization. *
2. The corporations are supervised and subject to rules of entities: federal, state and *
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