Question

Explain the advantages and disadvantages of the following business entities:

1. Sole proprietorship

2. Partnership

3. Corporation

Answer 1

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Three major types of business ownership in U.S.:
1. Sole Proprietorship
A business owned and operated by a single individual. It is the most common form of business structure in the United States.
The advantages with a sole proprietorship is its ease and cost of formation. Take required license and permits. All profits from the business belong to the owner.
Only owner makes all the decisions and direct the entire business operations; The government regulation is very little.
2. Partnership
A business that is owned and operated by two or more people.
There are two basics forms of partnerships, general and limited. In a general partnership, all partners have unlimited liability, while in a limited partnership, at least one partner has liability limited only to his or her investment
while at least one other partner has full liability.
The advantages of a partnership are ease of organization, combined knowledge and skills gives strengths for better business decision-making; greater availability of financing;
and very little government regulations.
3. Corporation
A business that is a legal entity created by the state whose assets and liabilities are separate from its owners.
There are public corporations whose stock are traded on a public stock exchange and there are small businesses are which are private corporations.
A private corporation is owned by a small group of people who are typically involved in managing the business. Forming a corporation requires developing a legal document called the “Articles of Incorporation”
and submitting them to the state in which the corporation wishes to reside.
The advantages of a corporation include limited liability i.e. the owner or the stockholder can only lose up to the amount they invested ; unlimited lifespan of a corporation,
great sources of funding; and ease of transfer of ownership.