Starting a Business: Sole Proprietorship or Partnership

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Starting a Business: Sole Proprietorship or Partnership



November 7, 2011

Verbena Williams

Starting a Business: Sole Proprietorship or Partnership

Starting a business takes conducting research, knowing the disadvantages and advantages in the designing and establishment of the company, understanding legal obligations the company must possess, and determining how the funding for the company, to name a few. Certain benefits are available as well as several shortcomings, when using different ownership choices This paper will address the advantages and disadvantages in a sole proprietorship and partnership business, financial statements, and other areas of important to a successful start-up.

Advantages and Disadvantages

Different types of ownership are available for the start-up of a small business. The ownership of a business will be either a sole proprietorship or a partnership. With sole proprietorship, one person is solely responsible for business decisions, debts, liabilities, duration of the business, and legal ramifications. With a partnership, the formation of a business is between two or more people. They share the control, split tax obligations, use the knowledge and experience of the other, and allows easy establishment of the business (Kimmel, Weygandt, & Kieso, 2009).

Each style of ownership has advantages and disadvantages. A few advantages a sole proprietorship, single owner may experience:

• One person controls all the decisions.

• Start-up is easy and requires the least capital to form.

• Revenue falls under the personal taxes of the owner.

• Owner controls the duration or dissolution of the business.

A few disadvantages are:

• May experience problems establishing the company’s credibility.

• Legally responsible for all debts and liabilities the company incurs.

• Problems raising the capital to start business.

• Possible loss of personal assets to cover business debts.

With a partnership, the...