Financial

Nicole Putman

Unit 1 Discussion Board

The World of Finance

FIN410-0704B-01: Financial Management

November 15, 2007

The three most common legal forms of business organization include sole proprietorship, partnership and corporation. Each has their own advantages and disadvantages.

Sole Proprietorships:

It is a business that is operated and owned by one person for their own profit. Sole proprietorships are making up about 75 percent of all business firms. Has to raise the capital or borrow the money to get the business started. The owner has to be responsible for all the decisions that are made for the business. There is unlimited liability.

There are many advantages to sole proprietorships. The owner is able to have complete control and decision making power over the business, there is no going to someone else to get them to understand or agree to your ideas for the company. Any sales or transfers are taking place at the discretion of the proprietor. The owner of a sole proprietorship does not have to pay any corporate tax payments. There is a minimal legal cost to forming a sole proprietorship. There are just a few formal business requirements that are made upon the proprietor. The owner receives any profits and has to sustain all the losses of the business. It is made easier to dissolution of a sole proprietorship. There is another plus to be the only owner of the business; the owner is able to have independence and secrecy.

There are also many disadvantages to sole proprietorships. The proprietor will be personally held liable for debts and obligation that the business has acquired. It is harder to get investor to invest in the business due to the fact that they don’t usually because sole proprietorship have the chance of losing money and failing in the first year. The total wealth of the owner can be taken to satisfy the debts that the business sustained. The owner will have to be a jack-of-all-trades. There is likely that the business continue when the proprietor dies.

Partnerships:

It consists of two or more people that are operating and owning the business for profit. It only accounts for ten percent of all business firms. The business is established by a written contract that is known as articles of partnership. There is also have unlimited liability and all the partners are held legally liable for all debts.

There are many advantages of partnerships. There is a shared financial commitment between the partners. The partners have a pool of resources, expertise and strengths among each of the partners.

There are advantages and disadvantages of partnerships. The partners have a shared financial commitment to the company. There is limited started cost. It is more possible to raise more funds. There is more borrowing power which is enhanced by more owners. There is more available brain power. The owners have just few formalities, must applicable licenses.

There are some of disadvantages to partnerships. The owners can have different visions or goals about the business. There is a chance that the partners can have personal disputes. The owners have unequal commitment in terms of time and finances. Every partner is personally liable for debts incurred, decisions made and actions that are taken by the partners. There can be many disagreements in management plans, operational procedures and the future vision for the business. It is more difficulty in attracting investors. ALL the owners or partners have unlimited liability and they may have to cover all the debts of the partners. The partnership is dissolved when one of the partners dies.

Corporations:

Corporations