Small Business Analysis
Small Business Analysis
There are four different types of business organizations that are popular among small business owners; sole proprietorship, partnership, C-corporation and S-corporations. Tax, legal and financial reporting may vary from organization to organization, so finding the right fit for your services and or products is crucial. Sole proprietorship is the most common form of business. It is the simplest and most inexpensive business to form. Sole proprietorship consists of one individual owner who is entitled to the full profits, but is also responsible for any debts that the company may incur. There is no formal action that needs to be taken in order to form a sole proprietorship. Sole proprietorship is not only the easiest and inexpensive business structure to start, even in the legal aspects the cost is small; just obtain the appropriate license or permits to operate. Although with simple start up and minimal costs there are some disadvantages to having a sole proprietorship. Sole proprietorship also means that there is unlimited personal liability, since there is no legal separation between the owner and the business. Raising money is also another challenging aspect in a sole proprietorship, since you cannot sell stock in the business that often means that investors are unlikely to invest. Obtaining bank loans can also prove challenging, since most banks are hesitant to loan to a sole proprietor for fear of failed repayment. Balance sheet is the statement of the financial position of a business at a specific point in time. The financial position of a sole proprietor is showcased by the amount of the assets held, liabilities and the amount of the owner’s capital. Income statement is also utilized by a sole proprietorship, income statement reports earnings from a specific period of time. Revenue is categorized as increases in owners’ capital from the sale of goods and or services. Statement of cash flows illustrates where cash came from and when it went during a period of time. Statement of cash flow also accounts for how much cash was on hand from the start to the end of the period. Partnership is composed of one business and two or more people who share ownership. In partnerships each owner will back all aspects of the business; which include money, property, labor and skill sets. In addition to all owners contributing to all facets of the company, profits and losses of the business are also shared. Partnership consists of three types of partnership arrangements; general partnerships, limited partnerships and joint ventures. General partnerships operates under the assumptions that all responsibilities of the business is shared equally among all of the partners. Limited partnerships allow for partners to have limited liability along with limited input regarding management decisions. Limited partnerships are most appealing to investors of short-term projects. Joint ventures are composed similarly to general partnerships, the only thing that varies is the amount of time. Usually joint ventures are only for a limited amount of time for a single project. Similar to sole proprietorships, partnerships are easy and inexpensive to form. In a partnership, since it is composed of two or more individuals that often means that the financial commitment is shared among the owners. Since each partner is equally invested in the partnership it is typically easier to combine resources in order to obtain money. Since there are two or more partners within a partnership this will usually mean that everyone is bringing something different to the table. This is beneficial in terms of utilizing strengths, resources and skill sets of each partner. Partnerships often cultivate a highly motivated work environment when it comes to employees. Partnerships can offer a chance for an employee to become a partner, hence attracting highly motivated employees. As with...
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