The strength of the sole proprietorship are the ease of formation

The strength of the sole proprietorship are the ease of formation, tax preference, employment, decision-making and ownership. Setting up a single proprietorship is much simpler and much cheaper than setting up a formal company. Some states allow in the absence of suitable for most companies under the condition of double taxation standard set up wholly owned enterprises. A sole proprietorship can be named after its owner, or can use a dummy name to enhance its marketing. Second, tax incentives. Owners of a single proprietorship do not need to submit separate business tax reports. Instead, they will list their business information and data on their tax returns. This can save money on accounting and tax returns. The business would be taxed at the rate of personal income rather than corporate tax rates. Another advantage of the sole proprietor is employment. Sole proprietorship can hire employees. This may lead to many benefits associated with creating jobs, such as tax breaks. In addition, the spouse of a business owner can be hired without being formally announced as an employee. It is also possible for a married couple to start a sole proprietorship, although responsibility can only be borne by one person. Decision-making is also the strength of a single proprietorship. Control of all business decisions remains in the hands of the owner. The owner may also transfer the sole proprietorship enterprise at any time they deem necessary. (Clarke, 2017) The power of a sole proprietor is ownership. The sole proprietor of a sole proprietorship has all the authority to make a decision on behalf of the company. Full ownership and management control is another advantage of owning a single proprietorship. Owners are not required to attend formal meetings of owners and members of other business organizations. The owner of a sole proprietorship may decide to sell or transfer the company to another person and make important business decisions based on his or her judgment. (Johnson, n.d.)
The weaknesses of sole proprietor are liability, taxes, lack of “continuity”, difficulty in raising capital and limited ability to raise capital. Liability is the weaknesses of the proprietorship .The business owner will be held directly responsible for any losses, debts, or violations coming from the business. For example, if an enterprise has to repay its debt, it will be satisfied from the owner’s own personal fund. This is drastically different from corporations, wherein the members enjoy limited liability (i.e., they cannot be held liable for losses or violations). Another weakness of the proprietorship is taxes. Although the sole proprietorship enterprise has many tax advantages, the main drawback is that the owner must pay individual income tax. In addition, some tax breaks may not be deductible, such as employees’ health insurance premiums. Lack of “continuity” means that when the owner dies or loses capacity, the enterprise will not continue to operate because they are regarded as the same person. Upon the owner’s death, the business is liquidated and becomes part of the owner’s personal estate, to be distributed to beneficiaries. This could impose a heavy tax burden on beneficiaries because of inheritance and inheritance taxes. This can result in heavy tax consequences on beneficiaries due to inheritance taxes and estate taxes. Then there is the difficulty of raising money. Since the initial capital is usually provided by the owner, it is difficult to generate funds. Sole proprietorships do not issue stocks or other money-generating investments like corporations do. (Clarke, 2017) Last is limited ability to raise capital. Sole proprietorships are unable to sell interest or shares in the business as a means of raising money. They also lack other forms of business structure, making access to loans and other sources of financing more difficult. (Truex, n.d.)
The strength of partnership is capital?flexibility, shared responsibility, decision making and privacy. The strength of partnership is capital. Because of the nature of the business, partners will fund the business with start-up capital. This means that more partners will be able to invest more money, which will give the company greater flexibility and greater growth potential. It also means more potential profit, which will be equally shared between the partners. After then, the strength of partnership is flexibility. A partnership is generally easier to form, manage and run. They are less strictly regulated than companies, in terms of the laws governing the formation and because the partners have the only say in the way the business is run (without interference by shareholders) they are far more flexible in terms of management, as long as all the partners can agree. Another strength of partnership is shared responsibility. Partners can share the responsibility of the running of the business. This will allow them to make the most of their abilities. They may assign work based on their skills, rather than split the management and share the same share in each business task. So if one partner is good at figures, they might deal with the book keeping and accounts, while the other partner might have a flare for sale and therefore be the main sales person for the business. A decision is a partner sharing decision that can help each other when needed. More partners mean that more brains can be commercialized and solve business problems. (thecompanywarehouse., 2010) Last, the strength of partnership is privacy. Compared with a limited company, the partnership affairs can be kept confidential by the partners. In contrast, in a limited company, the company can access certain documents publicly, and the company’s shareholders can choose to consult the various registers and other documents that the company needs to keep. (Korchak, 2017)
The weaknesses for partnership are disagreements, agreement, liability, taxation and profit sharing. The weaknesses for partnership are disagreements. One of the most obvious disadvantages of partnership is the danger of disagreements between the partners. Obviously, people have different ideas about how to run a business, what they should do, and what is in the best interest of the enterprise. This could lead to disagreements and disputes, which would not only damage the business, but also harm the relationship. This is why it is always advisable to draft a deed of partnership between the formation period to ensure that everyone is aware of what procedures will be in place in case of disagreement and what will happen if the partnership is dissolved. The weaknesses for partnership are agreement. Because partnerships work together, it is necessary to have all partners agree to what is being done. This means that in some cases there is less freedom to manage the business. Especially compared to sole- traders. However, there is still more flexibility than with limited companies where the directors must bow to the will of the members (shareholders). Next, the weaknesses for partnership is liability. Ordinary Partnerships are subject to unlimited liability, which means that each of the partners shares the liability and financial risks of the business. This is impossible for some people. This can be dealt with by setting up a limited liability partnership, which benefits from limited liability for limited liability companies, while also leveraging the flexibility of the partnership model. Then is taxation. One of the main drawbacks of the partnership is that the tax law stipulates that a partner must pay taxes in the same manner as the sole proprietor, each submitting a self-assessment tax return annually. They are also required to register as self – employed with HM Revenue ; Customs. The current laws mean that if the partnership (and the partners) brings in more than a certain level, then they are subject to greater levels of personal taxation than they would be in a limited company. This means that in most cases, establishing a limited company would be more beneficial because tax laws are more advantageous (see our article on the pros and cons of a limited company). Last, the weaknesses for partnership are profit sharing. Partners share the profits equally. This can lead to inconsistencies, where one or more partners do not invest considerable effort in the operation or management of the business, but still reap the rewards. (thecompanywarehouse., 2010)

x

Hi!
I'm Dianna!

Would you like to get a custom essay? How about receiving a customized one?

Check it out