Hi, need to submit a 3000 words paper on the topic Forms of Business Organization. Sole proprietorships do not enjoy limited liability. This means that the business owner will be personally liable for all the business debs and risks and as their personal belongings will be confiscated to settle the claims of the creditors. Operating sole proprietorship form of business puts both the business as well as personal assets at risk owing to the fact that this form of business has unlimited liability (Cody, Hopkins & Perlman 202).
Control: the business is owned and controlled by the owner. This means that the owner without consultation handles all the critical decisions of the business single-handedly and as such, he/she has full authority to delegate tasks at will. Income taxes: Sole proprietorship income is taxed on the owner’s personal income. The Internal Revenue Service (IRS) treats income from sole proprietorship as personal income and thus taxes are charged on the owner’s income (Cody, Hopkins & Perlman 202).
Continuity of the business: Sole proprietorship business is not a separate legal entity from its owners and as such, it does not enjoy perpetual existence as the death, or bankruptcy of the owner will lead to the end of the business.
Profit retention: The sole proprietor enjoys all the profits by himself and therefore he is the one to decide the amount to give up for plough back into the business.
Location: Sole proprietorship is one of the easiest businesses to operate taking into consideration that it is not affected by the change of location as most states operate similar laws and regulations relating to a sole proprietorship.
Advantages It is easy and less expensive to form compared to other forms of business organizations such as C-corporations and LLC. This form of business organization requires less capital to start as well as a few legal formalities. Avoids double taxation as in the case of C corporations The sole proprietor enjoys all the profits alone taking into consideration that this form of business is a one-man show. Quick decision making as no one is consulted in case a decision has to be made like in the case of general partnership (Cody, Hopkins & Perlman 9).
Disadvantages Sole proprietorship has unlimited liability and as poses a risk of loss to personal as well as business assets in case of credit default. Sole proprietors have limited capital owing to lack of a wide range of avenues of raising capital as in the case of C corporations. Lack of perpetual existence owing to the fact that illness, bankruptcy or death of the owner lead to termination of the business.
A general partnership is an unincorporated form of business which involves two or more individuals (maximum of 20) coming together to form a business in order to make profits. Unlike in the case of a sole proprietorship, partners in the partnership business share into the ownership, management, profits, loses and critical decisions affecting day-to-day operations of the business.
Characteristics Liability: The General partnership does not enjoy limited liability as in the case LLC, C corp., or S corp. This means that all the partners are personally liable for all the debts and liabilities of the business. In fact, the partners risk losing, not only their investments in the business but also their personal property in case the business fails to honour its credit obligations (Cody, Hopkins & Perlman 9).
Income tax: . The income of the general partnership business does not attract taxes considering that partners will be taxed on the income of the partnership business.