Question

The three main forms of legal business structures are; a sole proprietorship, a partnership, and a corporation. Discuss the advantages and disadvantages of each form.

no plagiarism and also 200 words and no images

thanks

Answer 1

Advantages of Sole Proprietorship
1. It is easy to start or close a business with minimum paperwork and legal hassles.
2. The entire proceeds from profit goes to the owner.
3. The tax rates are simpler as they have to file only income tax return and not corporate taxes.
4. Control of the business rests with a individual.

Disadvantages :
1. The owner has complete liability of debt issued by banks.
2. It is difficult to raise capital and scale up the business
3. Attrition level of employees is high in sole proprietorship.

Advantages of Partnership

1. It is also easy to start with minimum paper work and legal hassles just like Sole proprietorship.
2. In this case liability and risk are share among the partners.
3.. Decision making becomes easy as more people are involved make partnership better than sole proprietorship in this aspect.
4. It helps in raising more capital as partners can put in their funds for the business

Disadvantages of Partnership

1. Conflict between partners might create problems for the business.
2. The debt liability in a partnership is unlimited and the owners cannot be shielded in case of default.
3. Profit sharing between partners can be an issue if all members do not put equal effort and this causes disagreements.
4. Tax norm donot favour partnership as they are favourable to corporations.

Advantages of Corporation:
1. There is limited liability of the promoter in cause of default in loan payments.
2. There capacity to raise capital is huge. They can opt for private placement, issue shares or preferred stocks to raise capital.
3. Tax policies are in favour of corporations.

Disadvantages of Corporations:
1. Legal hassles, money and time requirement are more in setting up or closing a corporation.
2. Corporations are regularly monitored by government agencies, hence it necessitates maintaining proper paper work.
3. The tax filing process can be very cumbersome.