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Advantages And Disadvantages Of Sole Ownership Of A Business

Decent Essays
Sole Proprietorship:

A sole proprietorship may be one of the simplest ways to start a business. Essentially, the owner is the business.

Sole Proprietorship Advantages:

Owners receives all profits, easier to start up and lower cost because there are no required filing fees, fewer documents are required at start up, owners is free to make own decisions concerning the business operations and owner pays only personal income taxes on the profits.

Sole Proprietorship Disadvantages:

Owner alone is responsible for all liabilities incurred by the business; if the business does not have enough assets to pay back business debts, creditors can take the personal assets of the owner. Owner’s ability to raise capital is limited to personal funds and the funds from people who are willing to give the owner loans, which can limit the size of the business. The business may come to an end at the owner’s death, it does not continue unless transferred to heirs, but when it is transferred to family or heirs a new sole proprietorship is created.

Partnerships:

There are two forms of partnerships, general partnerships and limited partnerships. There are three essential elements to a general partnership:

a sharing of profits and losses, a joint ownership of the business, and an equal right in the management of the business.

In a limited partnership there is one general partner and one or more limited partners. The general partner assumes the responsibility for the
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