Forms of Business

In: Business and Management

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Explain the forms of business. Which form of ownership would you prefer?

There are 3 main forms of Business organizations

a) Sole Proprietorship (b) Partnership (c) Corporation

a) Sole Proprietorship

In a Sole Proprietorship, there is no legal distinction between the Sole Proprietor's status as an individual from his or her status as a business owner. Although sole proprietorships are common in a variety of industries, they are concentrated primarily among small businesses such as repair shops, small retail stores and service providers such as plumbers, hairstylists and photographers.

Advantages • Easiest to get started • Greatest Freedom of action • Maximum authority • Income tax advantage and Social Security advantage

Disadvantages • Unlimited Liability • Death or illness endangers business • Growth limited to personal energies • Personal affairs easily mixed with business

b) Partnership

A partnership is an association of two or more persons who operate a business as co-owners by voluntary legal agreement. Many small businesses begin as partnerships between co-founders.

Advantages • Two heads are better than one • Additional sources of venture capital • Better credit rating than corporation of Similar size

Disadvantages • Death withdrawal, or bankruptcy of one partner affects business • Difficult to get rid of bad partner • Hazy lines of authority

c) Corporation

A Corporation is a legal organization with assets and liabilities separate from those of its owner. A corporation can be a large or small business. It can be Ford Motor Corp or a local auto repair shop.

Advantages • Limited liability for stockholders • Continuity • Transfer sales • Easier to raise capital • Possibly to separate business • Functions…...

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