A sole proprietorship is the oldest and the simplest form of business organization o set up. It is a business owned and managed by a single individual. The owner has the complete control of the business form making decisions to running day-to-day activities. A sole proprietorship can have different people operating the business, but it only has one owner.
Advantages of Sole Proprietorship
In a sole proprietorship, the owner has the control of the business. One is free to make any decision regarding the company. The process of decision-making is also fastened since no one else is involved in the decision-making process.
There is direct motivation in a sole proprietorship. The owner enjoys all the income earned by the business. In this case, the owner pays personal income tax; thus, avoids paying federal and state income tax (Skripak, 2016).
A sole proprietorship is easy to start and wind up. The owner requires no legal formalities to set up a business and can even begin with minimal capital. The easy setup process also makes it easy to terminate this form of company. It is the sole discretion of the owner to start or end a sole proprietorship.
Disadvantages of Sole Proprietorship
In a sole proprietorship, the owner has to be available to ensure the successful running of all activities. If the owner is not around, the business dissolves.
Limited capital is another limitation of a sole proprietorship. The owner arranges for the money required for the company and this becomes a significant challenge.
Unlimited liability: The owner is responsible for any losses incurred by the business.
A partnership is a type of a business form where two or more individuals pull resources together and start a venture based on formulated rules to ensure the successful running of the business. Setting up a partnership is complicated but is still relatively easy and inexpensive (Skripak, 2016).
Advantages of Partnerships
Partnerships bring together a group of talented individuals to run and maintain a business.
Financing is easier since the individuals in the organization can use their resources to access loans from banks.
The continuity of the company is guaranteed. Partners can sign an agreement that allows the business to continue running if one partner excludes himself from the group.
Disadvantages of Partnerships
Partnerships are subject to unlimited liability. Each partner is liable for his actions and the actions of the other partners.
Slow decision-making process. In partnerships, the individuals tend to disagree on some decisions regarding the business, and this may slow down the activities of the company and lead to inaction.
Partnerships share all the profits. It is a suitable method, but some members are not comfortable sharing their earnings.
A corporation is nothing similar to sole proprietorship or partnerships. According to Skripak (2016), a corporation is a legal entity that is separate from its owners. A corporation can enter into binding contracts, pay taxes, engage in other investments, and can sue or be sued.
Advantages of a Corporation
Access to financial resources: A corporation enables the business to raise funds by selling stock. They have higher chances of receiving bank loans.
Corporations attract skilled and talented employees than sole proprietorships and partnerships due to their ability to pay high sales commissions and other benefits.
Continuity of the business is guaranteed. The corporation is separate from the owners; hence, the company can survive for years.
Disadvantages of a Corporation
Managers in a corporation focus more on career advancement than the profitability of the company.
Corporations discourage small businesses from incorporating due to the high fees involved such as licensing and accounting fees.
Corporations are subject to double taxation.
Skripak, S. (2016). Fundamentals of business. Pamplin College of Business and Virginia Tech Libraries.
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Essay Sample on Business Forms: Sole Proprietorship, Partnership, and Corporation. (2022, Apr 14). Retrieved from https://speedypaper.com/essays/essay-sample-on-business-forms-sole-proprietorship-partnership-and-corporation
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