Forms of business Essay Example | Topics and Well Written Essays - 750 words

Forms of business - Essay Example There are no consultations involved in the decision making process. Moreover, tax preparation process is very easy since the business is not taxed separately and the tax rates are lowest of the business structures. According to Pride, Hughes & Kapoor (2012), owners of the business are always free to mix business or personal assets. Unfortunately, sole proprietorship involves unlimited personal liability since there is no legal separation between the owner and the business. The owner of a business can be held responsible for the debts and obligations of the business and the risk extends to any liability incurred by employee actions. Raising capital for sole proprietor is always not easy because stock in the business cannot be sold and the investors cannot invest in them. Additionally, sole proprietorship seldom survive the death or disability of the owners Partnership Partnership involves relationship between two or more people coming together on a trade and every person contributes m oney, property, labor, or skills. It is also worth noting that every partner shares in the profits and losses and as much as it is strongly recommended, it is regarded very risky to operate without. There are three types of partnership arrangements including general partnerships, limited partnerships, and joint ventures. General partnership requires that profits, liability and management issues are equally divided amongst the partners and incase of unequal distribution, the proportion set is documented in the partnership agreement (Pride, Hughes & Kapoor, 2012). On the other hand the limited partnership enables partners to have limited liability d input as far as management decisions are concerned and the limits are based on each partner’s investment portion. Finally, the joint venture work almost like the general partnership but is always active for a short period or may be for a single project. Partners include their individual share of income or loss on their personal tax returns and their taxes generally are annual return of income, employment tax, and estimated tax. Partnership involves shared financial commitment due to the advantage of pooling resources to obtain capital and this may help in securing credit. Furthermore, partnership involves complementary skills derived from the partners’ strengths, resources, and expertise. Partnership may also attract highly motivated and qualified employees due to incentives such as offering opportunity to employees to become members. However, joint and individual liability acts as a disadvantage where partners are liable for their own actions and for business, debts, and decisions made by other partners and the personal assets for partners may be used to satisfy the partnership debts. Decision making process may also not be easy exposing partners to disagreements amongst partners. Corporation Corporation is a complex form of business and is an independent legal entity that is owned by shareholders and is held legally liable for the actions and debts of the business. Incorporating corporations is very costly due to the administration fees, complex tax and the legal requirements making it suitable for established and large companies. According to Pride, Hughes & Ka