Each traditional business form, sole proprietorships, corporations, and partnerships, all have their own advantages and disadvantages. Before you enter any of these types of business forms, you should always weigh out the advantages and disadvantages of what you are getting yourself into to see if it is worth it.
A sole proprietorship is the simplest form of business organization where the owner is the business. There are many advantages to a sole proprietorship. One major advantage is that the proprietor owns the entire business and receives all of the profits. A sole proprietorship is less of a hassle to start as well because few legal formalities are required. The sole proprietor is free to make any decision they want to such as who to hire, when to take a vacation, and what kind of business to pursue. You save money in a sole proprietorship because it is relatively cheap to start up and you don’t have to pay a lot of taxes. You only pay income taxes on the business’s profits and you are also allowed to establish certain tax-exempt retirement accounts. As good as all of that sounds, there are some bad things that go along with sole proprietorships as well. A major disadvantage of a sole proprietorship is that as sole owner, the proprietor alone bears the burden of any losses or liabilities incurred. If your business or employees get sued, there is unlimited personal liability for the owner of a sole proprietorship. Creditors can go after the owner’s personal assets to satisfy any business debts. As a sole proprietor it isn’t easy to raise money(capital) for your business because you are limited to your personal funds and any personal loans that you can obtain.
A partnership is one of the most common forms of business organization. A partner ...