3 forms of Business Organization
A sole proprietorship is the simplest form of business organization because it is run by just one person. There is little complexity in starting up a sole proprietorship because it may involve just getting a license and finding some premises. This is why most of the businesses are in the form of sole proprietorship. It is normally feasible for service providers such as physicians, freelancers, accountants, etc. Advantages
1. The owner keeps all the profits.
2. There is little complexity in setting up a sole proprietorship. 3. Small amount of capital is sufficient for startup.
1. It has unlimited liability of business debts which means that the debts that the owner obtains for the purpose of business are recovered from the personal assets of the owner if the business assets are insufficient to discharge them. 2. The income is taxed collectively with the owner's income from other sources this may make the owner liable to tax at a higher rate. 3. The life of a sole proprietorship is limited to the owner's life span. 4. Sole proprietorship's capital raising opportunity is limited mostly to the resources of the owner. This puts a constraint on the growth of business. 5. Ownership of a sole proprietorship may be difficult to transfer because this transfer requires the sale of the sale of the whole business to the new owner.
Partnership is a type of business in which two or more persons mutualy own and operate the business and agree to share profits equally or according to profit sharing ratio. It is similar to sole proprietorship in many ways. There are two main sub-classifications of partnerships: General Partnership:
A partnership in which all the partners share in gains or losses, and all have unlimited liability for all partnership debts, not just some particular share. For example if A and...
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