Question

Compare and contrast (Advantages and disadvantages) the three different forms of company ownership. For each, recommend the type of company that should use that form of ownership.

Answer 1

Particulars	Advantages	Disadvantages
Sole proprietorship	1. It is way easy to set up, no paper filing is required and is with least formalities 2. No registration required 3. Complete control and ownership 4. Easy to liquidate	1. Unlimited liability, personal properties can be attached in case of default. 2. Barrier to capital access from outside investors. 3.liquidation is only possible when the owner passes.
Partnership	1. It is also easy to form a partnership 2. Expertise of different partners can be used to run a firm. 3. provision for salary and profits both is there is partnership.	1. Liability is unlimited. 2.There may be disagreement among partners leading to issues.
Limited Liability Company	1. Liability is limited to the face value of shares hold. 2.No BOD is required. 3. Unlimited shareholders	1. The legal as well as accounting cost are usually higher than proprietorship 2. Need to file AOI or article of incorporation with the state. 3.On death of a member, the LLC will not exist, until specified in the agreement.

Company example:

Sole proprietorship : It is useful for those who will run the business on their own with limited resources and growth.

Partnership: If the amount of resources is higher and the number of people involved in the business is also more than 1, then partnership can be considered. The risk appetite should be higher for selection of partnership form of organization.

Limited Liability Company: Comparatively large amount of resources is there, future growth is required with limited liability, then LLC can be considered.