what types of business right for you, business, sole proprietorship, partnership, corporationThere are three forms of business, each form has advantages and disadvantage. We will discuss about the advantages and disadvantages of each form in the below of our post. We will start our lecture discussing about the factors which a person must examine before starting a business such as:

  • Capital is the most important factor to start a business. Without capital a business is not possible. More capital more bigger business will be.
  • Risk and business comes together. Business will be depend on how much personal property a person is willing to lose by starting the business.
  • Control is the third factor of business; control means the amount of authority the owner exercise.
  • A person must have managerial abilities to own a business. Managerial skill is needed to plan, organize and control a business.
  • A business requires lots of time. A business depends on how much time owner can provide to the business. Time is needed to give proper guidance to the employees.
  • Liability is the last factor of business. What taxes a business must pay to various governments on the earnings of the business.
Now we will discuss about the three types of business based on their advantages and disadvantages which will help you choose your desired business. And three types of business are followings 

advantages and disadvantages of business, types of business, sole proprietorship, partnership, corporation

Sole proprietorship: A business which is owned and manage by one individual is called a sole proprietorship. Sole proprietorship is oldest and most common business.

Advantages of sole proprietorship business is mentioned below.

  • Ease to start: A sole proprietorship is the easiest business to start. It involves a minimum number of problems. No general law is needed to check to start a sole proprietorship business.
  • Control: Owner has the total control of this business. The owner will always be making the final decision and he/she can work as along as he/she wants.
  • Sole participation of profit and loss: Sole proprietor is the only person who bears all the profit and losses.
  • Tax break: A major advantage of sole proprietorship is that the business pays no tax.
  • Secrecy: In sole proprietorship business it is easy to maintain the secrecy of the business.
  • Ease of dissolving: Sole proprietorship is the easiest business to dissolve. Whenever an owner wants, he can dissolve the business.

Disadvantage of sole proprietorship business is mentioned below.

  • Unlimited liability: Sole proprietor has the unlimited liability. If the owner fails in the business, then he/she have to sell his/her personal property to pay the business debts.
  • Difficulties in raising capital: Proprietor faces difficulty in providing capital as he/she is the only person involved in business.
  • Difficulty in managing: Proprietor is one and only person involved in this business so, it is very difficult for him to manage the business.
  • Lack of stability: Success of the sole proprietorship business depends on the capabilities of the owner. So, there is a lack of stability in this business.
  • Demands on time: Most of the time demand of the consumer is difficult to fulfill due to a single person.
  • Difficulty in hiring and keeping highly qualified employees: Naturally sole proprietorship business is small business. So it’s difficult for the owner to hire and keep highly qualified employees.

Partnership: A business is which owned by two or more individuals is known as partnership business.

The advantages of partnership business are mentioned below.

  • More capital:  In a sole proprietorship the amount of capital is limited. But in a partnership business the amount of capital  may increase significantly.
  • Combined managerial skill:  In a partnership business, people with different talent and skill may join together. So, combining these skills may bring the success in the business.
  • Easy to start: Partnership business is the easiest business to start after sole proprietorship business. It has a minimum number of rules and regulation. Just owner has to follow the articles of partnership.
  • Clear legal status:  Clear legal status means the question of rights, liabilities, responsibilities  and partnership duties which are clearly written in the partnership agreement.
  • Tax advantage: Partnership business has advantages over tax and this business pays no tax.  

The disadvantages of partnership are mentioned below:

  • Unlimited liability: In a partnership business liability of partners are unlimited. They are liable for everything that happens in the business.
  • Potential disagreement: In a particular matter partners will  not always agree with each other, as a result poor decisions may be made.
  • Investment withdrawal difficulty: A person who invests money in a partnership business may have a hard time while withdrawing the investment. It is much easier to invest in partnership business than to withdraw.
  • Limited capital's ability: The partnership business may have an advantage over sole  proprietorship on the ability of capital but it can't be compared with the corporation. In most cases, the partners have a limited ability and can't compete in business.
  • Instability: There is no stability in the partnership business due to partner's death, money withdraw from the business etc.

Corporation: A business that is a legal entity created by a specific law or act and which is separated from its owner is called corporation.

Advantages of a corporation business are mentioned below:

  • Limited liability: In a corporation business, the liability of a shareholder is limited. They are only liable for what they invest.
  • Skilled management team: Skilled management team means the professional managers who are trained and experienced career executives. The board of directors hires a professional manager and hand over their power the manager to operate the business.
  • Transfer of ownership: The transfer of ownership is really easy in corporation business. Shareholders can sell their ownership whenever they want.
  • Greater capital base: Compare to sole proprietorship and partnership business a corporation business has a greater capital base due to its size.
  • Stability: Corporation business, is a stable business because it has been created by a specific law or ACT. and also because of its size and capital.
  • Legal entity status: A corporation is a legal entity and it allows shareholders to have limited liability.

Disadvantages of corporation are mentioned below:

  • Difficulty and expense of start: Starting a corporation business involves various factors such as time factor, capital etc. it is difficult form a corporation business because it requires a large capital.
  • Lack of control: A corporation business is not easy to control due to its size of operation. The individual shareholder can easily buy and sell the shares of stocks.
  • Double taxation: The shareholder must pay income tax on the dividends they receive through ownership an aslo corporation has to pay taxes on its profit.
  • Government involvement: Government is directly involved with a corporation. A corporation business is organized or formed under the law of a state.
  • Lack of secrecy: In a corporation business, maintaining the secrecy is not possible because they have to publish an article about their operation which include corporation profit, loss, liabilities etc. for their shareholders.
  • Lack of personal interest: In most of the corporation, management and ownership are separated for this reason personal interest are hampered.
  • Credit limitation: If a corporation fails, its creditors can only look into the assets of the business to satisfy the claims.

That's all for today I hope you liked it and it helped you understand. If you have any question or feedback feel free ask we will try our best to help you. Thank you
What types of business is right for you? Advantages and disadvantages of sole proprietorship, partnership and corporation business
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