Legal, Social, and Economic Environments of Business - Assignment Example

Despite small businesses enjoying a wide range of advantages over their large business counterparts like lower initial costs, flexibility in terms of operations and maximization of the few niche of customers that they handle, there are still several issues and challenges surrounding the handling of such businesses if not just a few that they have to contend with and manage. The issues revolve around finances of such organizations, management problems including wrangles in leadership and employee issues (Associates & Granville, 1989).

The simple survey I carried out revealed to me a gist that many small businesses are at the dire risk of being bankrupt, this majorly arises due to the fact that most small businesses do not have at their disposal a wide range of financial sources to get money (Associates & Granville, 1989). Undercapitalization has also been highly attributed to poor planning and management of the few resources that are at their disposal, in our case there are very creative innovations without financiers. This is also largely attributed to the fact that a private businessperson has access to all the finances of the business and may not be in possession of all the knowledge to manage the resources (Hisrich, 2004).

Another contributor to the financial challenges is the fact that small businesses all financial liability finally rests on a single person who becomes liable to all business debts in case of liability hence financial burden. Apart from undercapitalization, most small businesses suffer businesses also suffer problems of general mismanagement due to lack of skills by their owners who act as the central managers to the businesses (Hisrich, 2004). . Apart from undercapitalization, most small businesses suffer businesses also suffer problems of general mismanagement due to lack of skills by their owners who act as the central managers to the businesses (Hisrich, 2004).

This problem can only be eliminated if management can be separated from ownership. Actually this problem as observed in many small businesses resulted from a myth called the “Entrepreneurial Myth” where an expert in a given filed is believed to be in the position of running a successful business in the same field. This is normally not the case (Associates & Granville, 1989). Problems with employees is normally not that much in small businesses but still due to one on one touch with all its employees the business at times come to loggerheads with its employees (Hisrich, 2004).

To help on the challenges above several legally instituted businesses are at the disposal of an entrepreneur to pick from when considering alleviating such issues. One is the sole proprietorship: this is a business entity where there is no legal distinction between the owner and the business (Hisrich, 2004). The owner enjoys all the profits and the benefits, has all the control in business operations with the only major challenge being difficulties in raising capital and harsh local authority taxation laws and regulations (Hisrich, 2004).

Secondly, we have the partnerships. As opposed to sole trader, partnership is an association of more than one individual and a maximum of around twenty who in an association spirit comes together and draws what we call a partnership deed that is a legal binding document for all partners (Associates & Granville, 1989). This document defines their extent of operation and business insolvent. In this form of business, profits