In: Finance
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)
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