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Question 4 (30 marks) Write brief notes indicating the requirements, advantages and disadvantages of the following...

Question 4

Write brief notes indicating the requirements, advantages and disadvantages of the following business entities:

(a) Sole Proprietorship (6)

(b) Partnership (7)

(c) Close Corporation (7)

(d) Company (10)

Solutions

Expert Solution

Solution :

a) Advantages of Sole proprietorship:

1) The opening of Sole proprietorship is very easy, unlike other registration.

2) It is very cheap to start a sole proprietorship

3) There are so many tax benefits

4) Owners have the direct control of the ownership

Disadvantages :

1) Owners are fully liable

2) business ends when the owner dies.

3) Raising capital is difficult.

Advantages of partnership:

1) The partnership is very easy to run and start the business

2) The responsibility is shared

3) Decision making can help each other to take the decision.

disadvantages:

1) The partners have to pay tax under the tax law

2) Profit is shared equally.

the advantage of the close corporation:

1) It is a separate legal entity

2) There is a perpetual existence

The disadvantage of the Close corporation:

1) It is complex

2) There is a double taxation

The advantage of the company :

1) Shareholders liability is limited to a company

2) Ownership transfer is easy

the disadvantage of the company :

1) The company can be expensive to establish

2) The reporting requirement is complex


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