Sole Proprietorship Discussion

Please assist with two student responses  Student Responses:
Christopher Campbell,
Sole Proprietorship is a type of business which is run by one owner. An advantage is it is an inexpensive
form of ownership. Another advantage is the owner can control the entire company and make decisions.
The disadvantages are they have unlimited liability and accountable for all debts against the business.
Also, there are difficulties in raising funds.
A partnership is a type of business that contains more than one owner. The advantages are having
multiple owners gives the ability, as well as responsibility to raise funds, will be increased. Also, the
profits generated from the business flow will directly through to its partner’s personal tax return. A
disadvantage is partners will jointly or individually be liable to take actions of the other partners.
Another disadvantage is it has a limited life so, it is possible to end up on the withdrawal or death of a
partner.
A corporation is a typical company in which a group of people will act as a single entity. The owners of a
company are their shareholders. An advantage of a corporation is shareholders have limited liability
against corporation’s debts. In addition, generally shareholders can only be accountable for their
investment in the company’s stock. On the downside, it takes more time to form a corporation
compared to a partnership and sole proprietorship. Also, the company is tracked by federal, state and
some local agencies. Legal documentation requires a lot of paperwork.
There are multiple requirements that New York has to incorporate a business which are; choose a name
that is not used, file certificate of incorporation, have a registered agent, prepare corporate bylaws,
have directors and first board meeting, issue stock, file New York biennial statement, and comply with
other tax and regulatory requirements. (https://www.nolo.com/legal-encyclopedia/how-formcorporation-new-york.html (Links to an external site.))
References:
Twomey, D. P. (2021). Anderson’s Business Law & The Legal Environment – Comprehensive Edition.
Vitalsource Bookshelf Online. Retrieved February 15, 2022, from
https://online.vitalsource.com/reader/books/9780357363850/pageid/264
Estany Rodriguez
1) Sole proprietorship
Advantages: The owner of the business is not required to pay for organizational fees. As the sole owner
of the business, the proprietor controls all decisions and receives all profits. The company’s net earnings
are not subject to corporate taxation, but instead are taxed as personal income.
Disadvantages: Sole proprietors are liable for the debts of their business without any limit to this
liability. The investment capital in the business is restricted by their resources. The authority to make
contracts for the business is terminated upon the death of the owner or his agents, and the business is
subject to dissolution.
2) Partnership
Advantages: Individuals can pool their resources through partnership forms of business organization,
then initiate and conduct their business without the need for an organized structure.
Disadvantages: In a partnership, liability is unlimited for each partner, and the business can dissolve
when one partner dies, so its future is uncertain. A professional partnership that converts to an LLP
shields its members from unlimited personal liability. LLCs protect innocent partners from personal
liability beyond their investment in the firm.
3) Corporation
Advantages: Investors, or shareholders, have the major advantage of limiting their risk of loss to the
amount of money they invested in the business. It has perpetual life which means that the death or
transfer of shares of the shareholders will not affect the corporation’s existence. In other words, a
corporation is an independent legal entity that owns property, contracts, sues, and can sue in its own
name.
Disadvantages: Corporate income taxes are collected from corporations, but shareholders are also taxed
on their income received from the corporation’s distributions. In this way, shareholders are subject to a
double tax. There are expenses involved in forming a corporation. State corporation laws may require
that certain documents be prepared, and fees must be paid. Incorporated companies must file annual
reports.
4) To incorporate a business in New York State, a certificate of incorporation needs to be filed. This
certificate is filed with the NYS Department of State. Corporation, Certificate of Incorporation in New
York State – NYC Business (Links to an external site.)
Twomey, David, P. et al. Anderson’s Business Law & The Legal Environment – Comprehensive Edition.
Available from: VitalSource Bookshelf, (24th Edition). Cengage Learning US, 2021.