A sole proprietorship is a business that is solely ran by one person. “According to data from 2003, there were more than 17.5 million proprietorships operating in the U.S. and those generated $969 billion in revenues” (Hodgetts & Kuratko, 2008). Establishing a sole proprietorship is easy if an owner uses one’s own name or can use a trade name by filing with the city of business.
Financial advantages to a sole proprietorship include all the profits belong to the owner of the business minus taxes, social security and Medicare paid out. Some proprietors have higher credit ratings because both the business and personal assets stand behind them. Lack of restrictions and freedom to run your own business and for some may need to get licensing from the state. Having a sole proprietorship has secrecy on operation sales, financial strengths, and profit margins. Owing your own business brings a lot of personal satisfaction and the success of your business is the amount you contribute to.
Disadvantages to a sole proprietorship include unlimited liability and the debt incurred is the owner’s responsibility. “Creditors have a claim for these debts and can exercise it against both the business assets and personal assets of the proprietor” (Hodgetts & Kuratko, 2008). Since a business’s tend to be smaller for one owner the amount of capital is limited to be raised for operations. Most banks only lend 50% of the business value. Limited life of the proprietorship depends on the individual financial aspect, dies, goes to jail, or chooses to end the business presents risk.
“A partnership, as defined by the Uniform Partnership Act (UPA), is an association of two or more persons to carry on as co-owners of a business for profit” (Hodgetts & Kuratko, 2008). Partnerships have declined over the years but still 10% of all business firms in the United States still exist. Partnership agreements are drawn up in case if a partner dies to include profits and losses, duties of partnerships, manners of controversies and how they will be settled to divisions of assets.
Types of partnership include a general partnership which has very active partners and assume responsibility for the firm. Limited partners include invest in a partnership but take limited risks of their assets as if the business fails they lose their investment but not their assets. “A silent partner is one who is known as a partner by the general public but who does not play an active role in the operations of the business” (Hodgetts & Kuratko, 2008). Someone who plays an active role in the business but may not be known by the public is a secret partner. A person who does not play a role in the business or known by the public is known as a dormant partner. A nominal partner is giving their name to be used to represent a partnership without investing or playing a role in the firm. “A limited liability partnership (LLP) is a relatively new form of partnership that allows professionals to...