Business Ownership Essay

on that point be three different forms of line of credit be argonrship, the resole Proprietorship, the Partnership, and the Corporation. Each of these byplayes get under ones skin major advantages and disadvantages.The sole ownership is a line of merchandise which is owned and managed by angiotensin converting enzyme man-to-man. rough of its advantages be, the ease of formation, its attention decl are, and its dispersal of win. Some of the disadvantages are, its unlimited liability, the lack of continuity, the capital letter requirements.Lets find with the advantages. A sole proprietorship is very easy to create. Anyone who wants their own task simply pauperizations to get the necessary licenses from, for pillow slip, the state of matter, the county, and/or their local anaesthetic goernment. afterward he or she meet these licenses, he/she passel begin operational their concern.In a sole proprietorship, the sole proprietor has full escort over his/her op erations. Be accept he/she has this control, they hind end respond quickly to the changes that may make pass in the market. This is a coarse motivator for a sole proprietor because he/she can keep up with the trends.The sole proprietor overly owns all the network that his/her business takes in. They themselves own the business and in that locationfore do non have to distribute the profits with anyone else. The only thing that he/she needs to do with the profits is pay the company expenses and the rest is theirs to do with as they please. This tends to be a great incentive for a sole proprietor.Next, we have the disadvantages. The sole proprietorship has unlimited individualised liability. The sole proprietor is in-personly liable for all of the businesses debts. He/she is the sole owner, which means there is no one else responsible to contributing to the payment of debts. This is one of the biggest disadvantages of a sole proprietorship. in that respect is as well a lack o f continuity in a proprietorship. If for any(prenominal) reason the sole proprietor dies, retires, or becomes incapacitated, the business could end. When this happens, if a member of the family, or an employee, does not take over the business, the business could be in big trouble.A proprietorship is ordinarily a small business, and to find good employees that are dedicated to staying with the business could be hard. The reason for this is that most tidy sum look for security, and advancement in their employment, this normally does not exist in businesses which are small. If no one takes over the business, and the business had debts, creditors can go to the courts for a petition to sell glowering the as lays so that they can pay back these debts, hence the business has discontinued.It is in worry manner very hard in a sole proprietorship to obtain capital. Most banks and other lending institutions have certain formulas/requirements for determining how legal a borrower may be. Many proprietorships do not meet these formulas/requirements and are therefore limited to whatever capital the owner has to contribute, and whatever funds he/she can borrow. This can be a major set back in a proprietorship depending on the amount of capital the owner has to invest.The next form of business ownership is the alliance. A partnership is an association of two or more people who co own a business for the purpose of making a profit. Some of its advantages are its ease of formation, its distribution of profits, its capital requirements, and its tax income. Some of its disadvantages are, its unlimited liability, its lack of continuity, and it management control.Once again, lets start with the advantages. The partnership, like the sole proprietorship, is also easy to devote. All the owners have to do is obtain the necessary business licenses, and submit a few required forms. If the business is run under(a) a trade name, the partners leave behind have to file for a prese nt to conduct their business. When the accomplish all of the above, they can start operating their business.In a partnership, an agreement is usually made up outlining the share of profits each partner should receive. It is necessary for the partners to abide by this agreement when it comes to distributing the profits to ensure that each partner receives the right amount. Besides for this technique, there are no restrictions as to how the partners distribute the companys profits, they just need to stay consistent with the agreement.A partnership also has a broader kitten of capital than the sole proprietorship. In comparison to the sole proprietorship, the partnership has several(prenominal) owners instead of one. This means that each partners personal assets go out support a larger borrowing capacity from lending institutions.When you are a part of a partnership, the business is not subject to federal taxation. A partnerships net income/losses are passed along to the partners as personal income, in which the partners have to pay income tax on. This way, the partnership avoids restate taxation.Next, we have the disadvantages of the partnership. One of its main disadvantages is its unlimited liability. One partner is presumptuousness the title of the general partner. This means that if there are any problems (for example with debts), that partner assumes full responsibility. This is also why the general partner is usually the partner with the least personal resources.A partnership, once again like the Sole Proprietorship, has a lack of continuity. Complications begin to arise if one of the partners die. A partnerships interest inheritance is often non-transferrable because the remaining partner may not agree on working with the person which inherited that portion of the partnership. This would cause great implications in the partnership because one person is no longer there, which means the work that person was responsible for now has to be distributed am ong the rest. There is a way of avoiding this problem though, the partners can agree on who will obtain the partnership interest in the event of them dying.Lastly, there is great potential for conflicts in a partnership. There is no longer one owner which means control is distributed among several people.With several people in control, there is no way to completely avoid conflicts. However, the partners will have to learn to work through their problems by communicating with each other. If they do not do this, their conflicts will remain unresolved which could end up being the cause of their partnership, and business, failing. Communication is essential in a partnership, as it is in any form of business.Finally, there is the mint. A deal is a separate legal entity apart from its owners, in which receives the right to exist from the state in which it is incorporated. It is the most complex of the three major forms of business ownership.Some of the advantages are, its limited liabili ty, its capital requirements, and its continuity. Its disadvantages are, the speak to and time in the in pot process, the double taxation, and the loss of management control.A corporation lets its investors limit their liability to the corporation by letting them decide the total amount of investment in the business. This is allowed because it is a separate legal entity, whereas a Sole Proprietorship and a Partnership are not. This also gives the corporation stockholders legal protection towards their personal assets outside the business.A corporation has great ability when it comes to attracting capital. The only terminal point they have, is the number of shares authorized in its charter, this too can be changed. The corporation can raise money by simply selling shares of round of its stock to investors. This way they gain money to begin business and expand.A corporations future does not lie in the hands of one individual person. It has shares worldwide, and will continue to liv e as long as people invest in it. The only way a corporation can discontinue, is if it fails to pay its taxes or is limited to a specific length of manner by the charter.Next, there are the disadvantages. To start a corporation it can be costlyand time consuming. The actual creating of the corporation can cost between $500 and $2,500. There are also fees involved in establishing a corporation which does not exist with a sole proprietorship, or a partnership. In some states you need the assistance of an attorney to establish the corporation, whereas in others you can do it all on your own.A corporation also has the disadvantage of double taxation. This means that it must pay taxes on its net income at the federal level, in most states, and to some local governments as well. The corporation pays taxes on dividends at the corporate tax rate, hence stockholders must pay taxes on the dividends they receive from the same profits at the individual tax rate. As you can see it is being tax ed twice.Theres also a potential loss of control by the founder(s) of the corporation. When shares are sold in the company, you are really selling shares of ownership, which gives some control to the person who bought the share. The more shares the founder sells to gain capital, the more control he/she is losing. This could be a big problem and amount to a great loss of control for the founder if he/she needs a large capital infusion.Lastly, the profits of the corporation are widely distributed. hoi polloi all over the world can obtain shares on the corporation, and therefore receive dividends from the corporation. Therefore the profits are widely distributed among all the shareholders.As you can see from the information I have given, there are three major types of business ownership. All of these types have their advantages and disadvantages, so it depends on what you decide is better for you in starting a business.