Advantages of A Sole Proprietorship

Advantages of a Sole Proprietorship
A sole proprietor has complete control and decision-making power over the business.
Sale or transfer can take place at the discretion of the sole proprietor.
No corporate tax payments
Minimal legal costs to forming a sole proprietorship
Few formal business requirements
Disadvantages of a Sole Proprietorship
The sole proprietor of the business can be held personally liable for the debts and obligations of the
business. Additionally, this risk extends to any liabilities incurred as a result of acts committed by
employees of the company.
All responsibilities and business decisions fall on the shoulders of the sole proprietor.
Investors won't usually invest in sole proprietorships.
Advantages of Partnership
Capital Due to the nature of the business, the partners will fund the business with start
up capital. This means that the more partners there are, the more money they can put into
the business, which will allow better flexibility and more potential for growth. It also
means more potential profit, which will be equally shared between the partners.
Flexibility A partnership is generally easier to form, manage and run. They are less
strictly regulated than companies, in terms of the laws governing the formation and
because the partners have the only say in the way the business is run (without
interference by shareholders) they are far more flexible in terms of management, as long
as all the partners can agree.
Shared Responsibility Partners can share the responsibility of the running of the
business. This will allow them to make the most of their abilities. Rather than splitting the
management and taking an equal share of each business task, they might well split the
work according to their skills. So if one partner is good with figures, they might deal with
the book keeping and accounts, while the other partner might have a flare for sales and
therefore be the main sales person for the business.
Decision Making Partners share the decision making and can help each other out when
they need to. More partners means more brains that can be picked for business ideas and
for the solving of problems that the business encounters.
Disadvantages of Partnership
Disagreements One of the most obvious disadvantages of partnership is the danger of

disagreements between the partners. Obviously people are likely to have different ideas
on how the business should be run, who should be doing what and what the best interests
of the business are. This can lead to disagreements and disputes which might not only
harm the business, but also the relationship of those involved. This is why it is always
advisable to draft a deed of partnership during the formation period to ensure that
everyone is aware of what procedures will be in place in case of disagreement and what
will happen if the partnership is dissolved.
Agreement Because the partnership is jointly run, it is necessary that all the partners
agree with things that are being done. This means that in some circumstances there are
less freedoms with regards to the management of the business. Especially compared to
sole traders. However, there is still more flexibility than with limited companies where
the directors must bow to the will of the members (shareholders).
Liability Ordinary Partnerships are subject to unlimited liability, which means that
each of the partners shares the liability and financial risks of the business. Which can be
off putting for some people. This can be countered by the formation of a limited liability
partnership, which benefits from the advantages of limited liability granted to limited
companies, while still taking advantage of the flexibility of the partnership model.
Taxation One of the major disadvantages of partnership, taxation laws mean that
partners must pay tax in the same way as sole traders, each submitting a Self
Assessmenttax return each year. They are also required to register as self employed with
HM Revenue & Customs. The current laws mean that if the partnership (and the partners)
bring in more than a certain level, then they are subject to greater levels of personal
taxation than they would be in a limited company. This means that in most cases setting
up a limited company would be more beneficial as the taxation laws are more favourable
(see our article on the Advantages and Disadvantages of a Limited Company).
Profit Sharing Partners share the profits equally. This can lead to inconsistency where
one or more partners arent putting a fair share of effort into the running or management
of the business, but still reaping the rewards
The popularity of corporations is due to following advantages:

1. The liability of the owners towards the creditors is limited to their investment in the company.
This means that in case of liquidation of the company, if the company's assets are insufficient
to meet the liability, nothing is required to be contributed by the owners. Only the owners'
contribution is at stake rather than their personal assets.
2. The corporation is considered a legal person with perpetual existence. It exists until it is
liquidated and death or change in ownership has no effect on the corporation.
3. Additional capital can be raised easily through stock markets, etc.
4. The ownership is represented by the number of share certificates held by a person, and this
makes the transfer of ownership very easy.
Following are the disadvantages of a coporation:
1. Establishing a corporation is a complex process and requires registration with the central
regulatory authority and listing on a stock exchange which required fulfillment of certain
requirements related to the amount of capital, number of directors, etc.
2. Normally the corporations have a large number of shareholders; they delegate the governance
function to a body of persons called board of directors. The board of directors hires
management to look after the day to day affairs of the corporation. The management is an
agent and the owners are principal. It is quite possible that the management may act to further
their own interests rather than the interest of the owners of the corporation. When this
happens it is called an agency problem.
3. In case of corporations there is double taxation. First of all the corporate income is taxed at a
flat rate and then the dividends paid to the shareholders is taxed.
What is a 'Joint Stock Company'
A joint stock company is an organization that falls between the definitions of a partnership and
corporation in terms of shareholder liability. In the United States, shareholders of joint stock
companies have unlimited liability for company debts, but in the United Kingdom, shareholder
liability is limited to the nominal value of shares held by each shareholder.
What is a 'Joint Venture - JV'

A joint venture (JV) is a business arrangement in which two or more parties agree to pool their
resources for the purpose of accomplishing a specific task. This task can be a new project or any
other business activity. In a joint venture (JV), each of the participants is responsible for profits,
losses and costs associated with it. However, the venture is its own entity, separate and apart
from the participants' other business interests.
Business Trust
An unincorporated business organization created by a legal document, a declaration of trust, an
d used in place of acorporation or partnership for the transaction of various kinds of business wi
th limited liability.
The use of a business trust, also called a Massachusetts trust or a common-law trust, originated y
ears ago to circumventrestrictions imposed upon corporate acquisition and development of real e
state while achieving the limited liability aspect ofa corporation. A business trust differs from a c
orporation in that it does not receive a charter from the state giving it legalrecognition; it derives
its status from the voluntary action of the individuals who form it. Its use has been expanded toin
clude the purchase of Securities and commodities.

Advantages of A Sole Proprietorship

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Advantages of a Sole Proprietorship

Disagreements One of the most obvious disadvantages of partnership is the danger of

The popularity of corporations is due to following advantages:

What is a 'Joint Venture - JV'

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