Discuss the Relative Advantages and Disadvantages of Sole Proprietorship, Partnerships and Companies in the Carrying Out of Business.

Table of Content

QUESTION

Discuss the relative legal Advantages and Disadvantages of Sole Proprietorships, Partnerships and Companies in carrying out business?

Sole Proprietorships

* Advantages

* Disadvantages

Partnerships

* Advantages

* Disadvantages

Companies

* Advantages

* Disadvantages

Sole Proprietorships

The sole proprietorship is a business which is owned and operated by one person. To establish a sole proprietorship, you need only obtain whatever licenses you need and begin operations. Hence, it is the most widespread form of small business organization. Sole traders usually are small retailers, plumbers, builders, internet entrepreneurs, beauticians, market traders, grocers and butchers to name a few.

Legal advantages of establishing a sole proprietorship when carrying out business are ease of formation, because there are less formality and fewer legal restrictions associated, when compared to the partnership or company. It needs little or no government approval and is usually less expensive than a partnership or company. Sole ownership of profits, the proprietor is not required to share profits with anyone. Control and decision making vested in one owner, in this case there are no co-owners or partners to consult. (Except possibly your spouse.) Also Flexibility, management is able to respond quickly to business needs in the form of day to day management decisions as governed by various laws and good sense. Additionally, relative freedom from government control and special taxation.

Legal disadvantages of establishing a sole proprietorship when carrying out business are unlimited liability, this is where the individual proprietor is responsible for the full amount of business debts which may exceed the proprietor's total investment. This liability extends to all the proprietor's assets, such as house and car. Additional problems of liability, such as physical loss or personal injury, may be lessened by...