Other Organizational Forms for Small Businesses (Busniess Law) Essay

Other Organizational Forms for Small Businesses (Busniess Law) - Essay Example It is the most popular kind of business. The owner of the business enjoys some advantages such as exemption from paying the corporate income tax. Also, he is his own boss, hence, able to keep the business secrets and make take total control of the business.This form of business is cheap and easy to form and dissolve without necessarily going through procedures like the other forms. The fact that the owner keeps all the profit is another highlight and motivation of sole proprietorship. However, this business form has its own shortcomings. For instance the owner is subject to unlimited liability of business debts. There is no separation between the business property and personal property. Therefore, creditors can extend to personal property to pay for their claims. The starting capital for this business can be an obstacle due to lack of source of financing. This can also hinder the expansion of the business due to limited capital. It can also experience management problems especially if the owner is not familiar with such areas. The owner may lose everything in cases where the liabilities are too much to bear. It also lacks continuity because its existence entirely depends on the existence of the owner. In a partnership, two or more people come together and form a business with a view of making profit. Each member is called a partner the members are collectively known as partnership firm. It consists of 2 to 20 people. The members require a partnership deed or agreement which is a document containing all the written agreements. Such agreements include names of the partners, how profit and losses will be shared, banking accounts, date of commencement, rights and duties of the members etc. Advantages of this form of business include the sharing of losses. There is also more available capital to start and expand the business. Responsibilities are shared hence it is not a burden to one person like in