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Discuss The Relative Advantages And Disadvantages Of Sole Proprietorship, Partnerships And Companies In The Carrying Out Of Business

1538 words - 7 pages

Table of Content

QUESTION
Discuss the relative legal Advantages and Disadvantages of Sole Proprietorships, Partnerships and Companies in carrying out business?

Sole Proprietorships
* Advantages
* Disadvantages

Partnerships
* Advantages
* Disadvantages

Companies
* Advantages
* Disadvantages

Sole Proprietorships

The sole proprietorship is a business which is owned and operated by one person. To establish a sole proprietorship, you need only obtain whatever licenses you need and begin operations. Hence, it is the most widespread form of small business organization. Sole traders usually are small retailers, plumbers, builders, internet ...view middle of the document...

Another disadvantage is less available capital, in comparison to other types of business organizations. It is relatively difficulty in obtaining long-term financing. When carrying out business in a sole proprietorship they usually have relatively limited viewpoint and experience this is more often the case with one owner than with several.

Partnerships

A partnership is an arrangement where entities and/or individuals agree to cooperate to advance their interests. The Uniform Partnership Act, adopted by many states, defines a partnership as "an association of two or more persons to carry on as co-owners of a business for profit." Though not specifically required by the Act, written Articles of Partnership are customarily executed. These articles outline the contribution by the partners into the business whether financial, material or managerial and generally delineate the roles of the partners in the business relationship. The following are example articles typically contained in partnership agreement. Some of the characteristics that distinguish a partnership from other forms of business organization are the limited life of a partnership, unlimited liability of at least one partner, co-ownership of the assets, mutual agency, share of management, and share in partnership profits.
Kinds of Partnerships are, Ostensible Partner these are Active and known as a partner. Active Partner this type may or may not be ostensible as well. Secret Partner these are active but not known or held out as a partner. Dormant Partner are inactive and not known or held out as a partner. Silent Partner are inactive, but may be known to be a partner. Nominal Partner (Partner by Estoppel) in this instance they are not a true partner in any sense, not being a party to the partnership agreement. However, a nominal partner holds him or herself out as a partner, or permits others to make such representation by the use of his/her name or otherwise. Therefore, a nominal partner is liable as if he or she were a partner to third persons who have given credit to the actual or supposed truth of such representation. Sub-partner. One who, not being a member of the partnership, contracts with one of the partners in reference to participation in the interest of such partner in the firm's business and profits. Limited or Special Partner. Assuming compliance with the statutory formalities, the limited partner risks only his or her agreed investment in the business. As long as he or she does not participate in the management and control of the enterprise or is in the conduct of its business, the limited partner is generally not subject to the same liabilities as a general partner.

Legal advantages of establishing a partnership when carrying out business are ease of formation. The legal informalities and expenses are few compared with the requirements for creation of a corporation. Direct rewards, when carrying out business the Partners are motivated to apply their abilities...

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