Question

Looking for a response to the following statement:

There are four forms of business organizations: sole proprietorships, partnerships, limited liability companies, and corporations. Proprietorships are easy to form, subject to very few regulations and do not have as high of income taxes. With that said, they are subject to more liability, are only allowed to stay in business for as long as the owner is alive and do not have large capital. Partnerships, like proprietorships, are subject to less taxes and are very easy and inexpensive to form, but they are subject to unlimited amount of liability and tend to not real large amounts of capital. Limited liability companies, or limited liability partnerships are limited in the amount of liability held on the company, is owned by investors who have control over the business and rising capital increases growth. Limited liabilities are more complex than proprietorships and require legal assistance in coming up with an operating agreement. The business also is effect more by the stock market than other types of businesses. As for corporations, it is easy to transfer stock and liability falls very little on the owners as they are only subject to losses from the money actually invested in the company. The main disadvantage would be that corporations are subject to larger taxes.

Answer 1

The sole proprietorships form of business organization is the easiest form. They are more suitable for small businesses with the owner can invest the required capital on his own and can manage the business himself. The biggest disadvantage in this is that the owner has unlimited liability and the organization comes to an end with the end of the owner. In this manner partnership is an upgraded form where there is greater capital contribution and less dependence on one owner. However the limitation of capital contribution by the partners has given rise to more complex forms of business organizations such as limited liability partnership, limited liability companies and corporations which allow the business to raise large amounts of funds. The members and owners’ enjoy limited liability but are subject to more stringent legal rules and regulations as well as complex functioning. Yet these forms are more suitable as the business grows larger.