Legal Classification of Businesses
Legally businesses are organized as sole proprietorship, partnership and corporation (Pride, Hughes, & Kapoor, 2009). A sole proprietorship is a business entity that is owned and run by a single person. In the sole proprietorship there is no legal distinction between the owner of the business and the business. In this business owner is responsible for all losses and the profits (Pakroo & Pakroo, 2008). Another type of business is a partnership. A Partnership is a form of business that is operated by two or more people. People operating the business have a common goal of making profit. In partnership each member has his own liability of debts that are incurred in the business. There are three classes of partnership. That is the general partnership, limited and limited liability partnership. Another type of business is corporation (Longernecker, Moore, Petty & Palich, 2005). A Corporation is said to be either a limited or unlimited liability entity. A corporation has separate legal personality from the members forming the corporation. A corporation is organized for profit, or it is organized for non profit. A corporation is owned by many shareholders and the activities of the corporation are managed by a board of directors (Longernecker, Moore, Petty & Palich, 2005).
Advantages of a sole proprietorship.
Sole proprietorship businesses are easy to start and they are governed by few regulations unlike other business like a partnership, and corporation which are not easy to start and they are subject to regulation (Meiners, Ringleb &Edwards, 2008). The owner of the sole proprietorship takes all the profit made from the business. In sole proprietorship the owner of the business is the boss and he makes the right decision concerning the business. This is an advantage to the owner of the business as he makes decision alone without any opposition (Campbell & Craig, 2005).
Disadvantages of a solepropriotership.
In a sole proprietorship it is hard to raise capital. The owner has unlimited liability since he is responsible for debts in the business as he is the manager. Another disadvantage is that the risk associated with the business increase as the business continues to grow (Campbell & Craig, 2005).
Reference
Campbell, D., &Craig, T. (2005).Organizations and the business environment.Edition2.Butterworth-Heinemann
Meiners, R., Ringleb, A., &Edwards, F. (2008).The Legal Environment of Business.Edition10
Longernecker, J., Moore, C., Petty, W., &Palich, L. (2005).Small business management: an entrepreneurial emphasis.Edition13.Cengage Learning
Pride, W., Hughes, R., &Kapoor, J. (2009).Business.Edition10.Cengage Learning
Pakroo, P., &Pakroo, P. (2008).The Small Business Start-Up Kit.Edition5.Nolo
Is this your assignment or some part of it?
We can do it for you! Click to Order!
