Question

discuss the types of organizations, advantages and disadvantages (in bullet forms) Words: 500

Proprietorships, Partnership, Corporations, Limited-Liability Partnerships (LLPs) and Limited –Liability Companies (LLCs)

Answer 1

Advantages and disadvantages of different types of organisation as follows :-

Proprietorship :-

Advantages :-

1. Formation of proprietorship is very easy

2. There are many tax benefits to proprietorship compared to other forms

3. Owners have complete and direct control on operations of bussiness

Disadvantages :-

1. Owners are fully liable

2. Raising capital is difficult

3. Continuity of business comes to an end with the death or departure of the owner.

Partnerships :-

Advantages :-

1. Less formal with fewer legal obligations

2. Sharing the burden

3. More partners, more capital

Disadvantages :-

1. Unlimited liability

2. Potential for differences and conflicts

3. Bussiness has no independent legal status

Corporations :-

Advantages :-

1. Limited liability

2. Separate legal entity

3. Perpetual life

Disadvantages :-

1. Double taxation in many countries

2. Independent management

3. Excessive filings and more statutory responsibilities.

Limited liability partnership :-

Advantages :-

1. No annual returns filing required

2. Compliance requirements of simpler as compared to corporations

3. Perpetual succession

Disadvantages :-

1. Limitations in transfer of ownership

2. More responsibilities for designated partners

Limited liability companies :-

Advantages :-

1. Seperate legal entity

2. No restrictions on number of members allowed

3. Pass - through taxation

4. Limited liability to members

Disadvantages :-

1. Formation costs are more compared to proprietorship, partnership.

2. Ownership is typically harder to transfer than with a corporation.

3. Limited life.

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