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Business Formation - Coursework Example

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The present coursework under the title "Business Formation" dwells on the contemporary business model. As the author puts it, "Being your Business Affairs Manager, I find it a part of my responsibilities to advice you in the decision making the process"…
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Business Formation
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"Business Formation"

Download file to see previous pages The entrepreneurs are required to make judgments based on their knowledge, understanding and size of the business. A small business with less capital may be established as a sole proprietor rather than a partnership or a company. Similarly, a company with high capital requirements and extended future expected growth may be established as a company/corporation. The advantages and disadvantages related to each of these business forms should be given appropriate consideration before making a decision. These advantages and disadvantages are discussed below to aid your judgment in the decision making process regarding the types of business formation structures available. Sole Proprietorship Sole Proprietorship is a form of business which is usually preferred by single owners to manage their small-sized businesses. Sole proprietorship is a form whereby the whole authority of managing the daily activities of the business, its management and decision making is limited to the owner of the business. The owners, under sole proprietorship, are the sole holders of any gains or losses generated by the business. They are solely and entirely accountable for the liabilities and rightful holders of the assets that business owns. The legal phenomenon is that business and the owner are equal or the same when it comes to any charge against or for the business. The business’s liability may be termed as the liability of the owners. There are a number of benefits that sole proprietorship brings for the business and the owners. These advantages distinguish this form from other legal forms of businesses. The first and foremost advantage of this kind of a business is the least complex structure of the business. The simplicity of the structure keeps the costs of starting the business and managing it to the minimal. Hence, it may be termed as a cheaper way of establishing a business. Since sole proprietors are the owners of the business with full authority to make decisions and changes in the business, this form provides an autonomous position to the owners. They have the authority to change suppliers, the way activities are performed and even the proportion of income which is to be reinvested and so on without any external opposition or conflict. In simple words, we can say that this form brings an independent authority to the proprietors for strategic and managerial decision making without any disagreement from any other party. Moreover, the advantage of enjoying the business profits alone is yet another charm for the proprietors to go for this option (Boone & Kurtz 2008). They are free to reinvest the whole profit that business generates or withdraw it wholly without any need to justify their decisions. In addition to all these benefits, sole proprietorship is also beneficial when the business is required to be dissolved. The simple structure helps in uncomplicated closure of the business. Regardless of the benefits this form of business brings, the disadvantages must be kept in view when making a decision regarding the expansion of your business. The autonomy that sole proprietorship brings is accompanied with the risk of losing all business and personal assets in case of any liability against the business.  ...Download file to see next pagesRead More
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