Compare and Contrast Two Types of Business Ownership Term Paper

Compare and Contrast Two Types of Business Ownership - Term Paper Example The owner of a sole proprietorship type of business only needs to register his/her name and get a good location, and the business can begin after this process. He is fully liable for all the debts and profits incurred; if a sole proprietor gets into a financial crisis, the creditors can sue the owner of the business, and if this lawsuit is successful, the business owner will pay all the debts. Sole proprietorship has no entity separate from the owner; this means that if the business owner signs a contract, it will only be under his name. Advantages of a sole proprietorship business include the facts that formation of the business is quite inexpensive and easy, carrying very minor formalities since it involves only one person. Employment tax is not charged on sole proprietorship types of businesses and owners exercise a lot of freedom since they may â€Å"freely mix business and personal assets† (Spadaccini, 2007, p.5). However, despite being the easiest type of business to sta rt, sole proprietorship has a number of disadvantages. These include the facts that sole proprietors cannot raise capital by selling interests from the business, business liabilities and other personal liabilities for debts and losses are unlimited, and it is quite impossible for the business to continue, if the owner passes away. Sole proprietorship can either be terminated by contract or if the owner dies. In case the sole proprietor gives up the business, sells it, or passes away, the existence of the business ceases (â€Å"Types of Business Ownership,† n.d.). Spadaccini defines partnership as â€Å"a business organization formed when two or more persons or entities come together to operate a business for profit† (2007, p.5). Partnership can be formed through... This report stresses that the partnership type of business ownership has a number of advantages. This comes from the facts that, just like sole proprietorship, the kind of business is very inexpensive and easy for the partners to start, since they are able to consolidate their resources together. The business involves very minor formalities and does not hold any annual general meetings. Taxation is very fair on partnerships involving small businesses, and the business is free from charges such as minimum taxes that are usually charged on Limited Liability Companies and corporations. The author of the paper talks about partnerships which have a number of disadvantages. These include partner’s subjection to unlimited personal liability, which is very common, except in cases where the partnerships and liabilities are limited. Partnership types of businesses also experience disputes from time to time arising from differences among the different partners and finally â€Å"Individu al partners bear responsibility for the actions of other partners†. There are various similarities and differences between sole proprietorship and partnership types of business ownership. This essay makes a conclusion that sole proprietorship and partnership types of business ownership share a number of similarities. However, the ways in which both businesses are formed and the way they operate are different.