Question

Partnership form of organization has advantages and disadvantages. Note that different types of partnerships have been developed to minimize some of these disadvantages. Alternatively, an individual or company can choose the proprietorship or corporate form of organization. Go to two local businesses that are different, such as restaurant, a retailer, a construction company, a professional office (dentist, doctor, etc) and find the answers to the following questions; 1. What form of organization do you use in your business? 2. What do you believe are the two major advantages of this form of organization for your business? 3. What do you believe are the two major disadvantages of this form of organization for your business? 4. Do you believe that eventually you may choose another form of organization? 5. Do you have someone to help you form this organization, (attorney, accountant, relative, etc)?

Answer 1

1. What form of organization do you use in your business?

                    I will use sole proprietorship

Sole Proprietorship is a type of business which is owned by a single person and who has full control over the business.

2. What do you believe are the two major advantages of this form of organization for your business?

Advantages of Sole Proprietorship;

1) It is easy to start the business and easy to dissolve.

2) All the profit belongs to a single person and all decisions are taken by the same person.

3) Less legal formalities and complexities are involved.

3. What do you believe are the two major disadvantages of this form of organization for your business?

Disadvantages of Sole Proprietorship;

1) The liability of the person investing in the sole Proprietorship is unlimited.

2) There is weak management if the sole proprietor does not have complete knowledge about the business.

3) Risk is higher as single person has to bear all the risks of business

4. Do you believe that eventually you may choose another form of organization?

Yes, I may choose corporate form of organization due to following advantages

Advantages of Corporation;

1.         Liability of the shareholders is limited.

2.         The capital can be raised easily because there are large numbers of shareholders who invest their money in the corporation.

3.         Company has a perpetual existence. It will not dissolve even if any member leaves

5. Do you have someone to help you form this organization, (attorney, accountant, relative, etc.)?

                Relatives