Question

In: Operations Management

Justine owes Smithers a debt and wants to pay Smithers with a negotiable instrument. Should Smithers...

Justine owes Smithers a debt and wants to pay Smithers with a negotiable instrument. Should Smithers accept a negotiable or nonnegotiable instrument, and why?

What are the advantages of a sole proprietorship, a partnership and a corporation?

Solutions

Expert Solution

Yes, Smithers should accept a negotiable instrument because it has certain benefits like it guarantees the payment of debt to the Smithers whenever he wants weather after a specific period of time or at demand, it provides guarantee that Justin have to pay the specific amount of money at the set time. So, Smithers must accept the negotiable instrument.

Advantage of sole proprietorship are -

1. There is privacy in sole proprietorship becuase im this there is no legal obligation to submit annual report to the government.

2. It is very easy to form an sole proprietorship as there is no need in sole proprietorship to file any paper and register the firm.

3. Owner has complete control over the sole proprietorship business. As there is only one owner.

4. Becuase in sole proprietorship there is only owner so decision making process is fast.

Advantage of partnership are -

1. There is less formal and minimal obligation by law as it is not mandatory in tye partnership firm to register the firm under the partnership act.

2. In partnership firm there is no burden only upon one person. The burden is divided among all the partner equally or in the decided ratio.

3. It will result into better decision making as all the partners consult together and make the decision which is beneficial for the company.

Advantage of corporation are -

1. there is limited liability of all the shareholders in an Corporation upto the amount invested by them.

2. incorporation it is not difficult to transfer the ownership because any shareholder can easily sell there shares.

3. Corporation has perpetual life which means the life of the company does not depends on the life of their shareholders the company may run long.

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