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Forms of Small Business Ownership - Essay Example

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The paper "Forms of Small Business Ownership" highlights that generally speaking, small businesses are typically confidentially owned sole proprietorships, corporations, or partnerships. In most cases, small businesses require minimal capital to set up…
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Forms of Small Business Ownership
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Extract of sample "Forms of Small Business Ownership"

This paper will discuss the three forms of small business ownership. This essay will also describe the merits and demerits of these three legal forms of organization.
A sole proprietorship can be described as a business entity that is owned by a single individual (Piper, 2011). A sole proprietorship can also be described as a sole trader business. This form of business does not have a legal peculiarity between the business and the owner. In this case, the owner receives all the profits and also bears responsibility for all the debts and losses incurred in the business.

In sole proprietorships, the sole proprietor can use his/ her name as the legal, business name. Sole proprietors can raise capital privately and publicly. In addition, sole proprietorships are least affected by the rules and regulations which are set by the government. On the other hand, the required capital to start a sole proprietorship is quite challenging since; this form of business entity has less documentation. When the sole proprietor manages to raise the capital to start the business, then the risks tend to grow. Sole proprietorships also lack continuity and also suffer unlimited liability (Piper, 2011).
A corporation can be defined as a business entity that is created under the legal laws of a country.

Corporations have liabilities and privileges which are different from the members of the corporation. There are numerous types of corporations including profit and non-profit organizations, publicly traded corporations, mutual benefit corporations, and benefit corporations among others. In the past, corporations are established as charters (Hupalo, 2003). Corporations attract more investors because they have limited liability, continuity, and ownership transferability. In addition, corporations have limited liability. This asserts that the creditors can run after the chattels of the corporation. On the other hand, incorporation is quite expensive. For a business to be incorporated there an exceptionally tedious procedure that is involved. Corporations are also regulated strictly. In most countries, corporations are regulated by certain government agencies.

A partnership is also a small business entity that is formed whereby two or more individuals are willing to form a business entity (Eisner & Cohen, 2010). In most instances, these individuals have identical business ideas. In partnerships, the profits and losses are shared equally among the business owners. In partnerships, the partners share the responsibility of managing the business. This means that the partners share most of the business tasks. The capital raised to start a partnership is also provided equally by the business partners. On the other hand, partnerships may involve several disagreements because the partners may have conflicting views regarding the business. In severe cases, these disagreements may lead to collapsing of the business (Eisner & Cohen, 2010). Finally, profit sharing in partnerships can also act as a disadvantage to the business. This is because lazy workers and hard-working partners are rewarded equally.

In conclusion, I would choose a partnership form of small business because, in partnerships, the partners share losses and profits equally. This form of business ownership ensures that the partners put up with full responsibility for their actions. In addition, the disagreements in partnerships are solved in a decisive way whereby all the partners contribute their thoughts and ideas in the decision-making. This asserts that all the partners are involved in making decisions for the business. Read More
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