The advantages of sole proprietorship are: easy to start-up and closure, pride of ownership, retention of all profits, flexibility of being your own boss and no special taxes. On the other hand, it has few disadvantages such as unlimited liability, lack of continuity, lack of money, limited management skills and having difficulty in hiring the employees.
- Partnership
The U.S Uniform Partnership Act defines a Partnership as a voluntary association of two or more persons to act as co owners of a business for profit.
There are some types of partnership.
- General partnership: It means a business co owned by two or more general partners who are liable for everything the business does.
- Limited partnership: It is a type of business co owned by one or more general partners who manage the business and limited partners who invest money in it.
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Master limited partnership: It is a special type of business partnership that is owned and managed like a corporation but often taxed like a partnership (Haag, )
The advantages of partnership includes: ease of start up, availability of capital and credit, personal interest, combined business skills and knowledge, retention of profits and no special taxes. The disadvantages are unlimited liability, management disagreements, lack of continuity and frozen investment.
- Corporation
It is an artificial person created by law with most of the legal rights of a real person, including the rights to start and operate a business , to buy or sell property, to borrow money, to sue or to be sued and to enter into binding contracts. It is organized under the state or federal statutes as a separate legal taxable entity. The shares of the ownership of a corporation are called stock and the people who own a corporation’s stock and thus own part of the corporation are called stockholders or shareholders. Once a company has been formed it can sell its stock to individuals or other companies that want to invest in the corporation. When the stock is owned by relatively few people and is not sold to the general public, it is known as closed corporation, in opposite in open corporation, the stock can be bought and sold to any individual (Winston & Jay, 2010).
The advantages of corporation are limited liability, ease of raising the capital, ease of transfer of ownership, centralized management, employee benefit plan, choice of tax year and perpetual life. The disadvantaged of corporation are corporate formalities, reporting requirements, taxation, and different type of fees payable by the corporation.
Works Cited
Boston Institute of Finance. Boston Institute of Finance stockbroker course: series 7 and series 63 test. New Jersey: John Wiley & Sons Inc, 2005
Haag. Business Driven Tech (W/Cd) 2E. New Delhi: Tata McGraw Hill Education Private Ltd, 2009.
Russell W. Burgess. Real Estate Home Inspection: Mastering the Profession. Chicago: Dearborn Financial Publishing, Inc, 2002.
Winston, Jay Winston. Complete Guide to Credit and Collection Law 2009-2010. Arthur Winston and Jay Winston, 2010.
