Question

sole proprietorship, partnership and the corporation. Compare and contrast the three forms including the plusses and minus’ of each form.

Answer 1

Sole Proprietorship

A sole proprietorship is business owned by a single individual, a person who collects all the revenue from it, and maintains all liability for business debt.

Plus:

Plusses:

A sole proprietorship is the least expensive and simplest business to operate and start. Since the business and the owner are one in the same, all of the income and expenses go straight to the owner, thus can report it on their personal income tax forms.

Minus:

As there’s legally no difference between the business and the owner, all of the owners’ private possessions are at risk if they are required to pay the debts of the business.

Partnership

A partnership is business wherein two or more individuals are sharing the ownership, profit and liability for the debts of the company.

Plusses:

Like a sole proprietorship, a partnership is also easy and simple to setup and run.

Minus:

Just like a sole proprietorship, the partners assume all liability for the debts incurred by the partnership. In addition, the partners may become deadlocked and unable to cooperate in the running of the business

Corporation

A corporation is a legally defined type of business wherein business is a separate entity and categorised as a “person” under the law, and thus liable for the businesses debts. As a result relieves the owners of the corporations much of their own personal liability

Plusses:

Owners of the corporation called shareholders hold a limited liability. Owners risk only the money invested in the corporation. Moreover shareholders are allowed to sell their shares to someone else and end their business ownership.

Minus:

The corporation is difficult as well as expensive in starting, and to a lesser degree in operating them. These are governed under state laws and need to follow very specific procedures and rules for record keeping and reporting.