Sole Proprietorship
This is a business owned by one person. It needs no charter, has few costs, and that person
gets to keep all the money to his/her self. The problem is, of course, that a one-person
business can’t make as much money as a large business, the owner will have to work very
hard, and if the business loses money, the loss translates directly to the owner
A sole proprietorship is generally the simplest way to set up a business. A sole proprietor is
fully responsible for all debts and obligations related to his or her business. A creditor with a
claim against a sole proprietor would normally have a right against all of his or her assets,
whether business or personal. This is known as unlimited liability.
Partnership
A partnership is a relationship that substitutes between two or more persons carrying on a
business common with a view to making profit.
It is an agreement in which two or more persons combine their resources in a business with a
view to making a profit. In order to establish the terms of the business and to protect partners
in the event of disagreement or dissolution of the business, a partnership agreement should
be drawn up, usually with the assistance of a lawyer. Partners share in the profits according
to the terms of the agreement. Where two or more persons wish to form a partnership, then
it is recommended that they agree on the terms upon which the partnership will be run and
the relationship between each other. This is done in writing and signed off as agreed by all
the partners and therefore it becomes a partnership deed or agreement.
Corporation
A corporation is a legal entity that is separate from its owners, the shareholders. No
shareholder of a corporation is personally liable for the debts, obligations or acts of the
corporation. Directors, officers and insiders can bear some liability for their involvement with
the corporation.
A corporation is identified by the terms "Limited", "Ltd.", "Incorporated", "Inc.", "Corporation",
or "Corp.". Whatever the term, it must appear with the corporate name on all documents,
stationery, and so on, as it appears on the incorporation document.
A corporation has legal rights and obligations of its own which are distinct from those of the
individuals who either constitute its membership or management. This attribute of legal
personality has received considerable judicial exposition in relation to registered companies
and the overall practical effects of the decided cases may be summarized as follows:
Factors to Consider in selecting a suitable form of business include:
Taxation
The entrepreneur should assess how the Government will tax him and his business under
the various forms of business ownership. On the same note, he may also be interested
in knowing the tax incentives available for his type of business. It may work in his favor in
subsequent periods.
Sources of additional funds
The startup capital is not enough to ensure growth. The firm cannot survive as a business
without proper capitalization, and this will include both matters of equity and debt. Equity
is gained through sales of business ownership interest, such as stock shares. Before the
entrepreneur even thinks about starting the business, he’ll need to have a good relationship
with his bank or an established financial institution. If he doesn’t have adequate capital, the
business will fail, regardless of how thorough his business plan was.
Liability
This will determine whether the entrepreneur can be sued for issues arising between the
business and his customers. It is extremely important, and often neglected when starting
a business, but this can actually make or break the entrepreneur during those crucial first
years when the business is trying to be established and grow. The entrepreneur should
protect himself from liability issues, and he should ensure that he is not personally held
responsible for any unfortunate happenings.
The nature of business contracts
For every major transaction the entrepreneur enters into, he should endeavor to have the
backing of a signed agreement. The best way the entrepreneur can avoid a dispute or
potential litigation, however, is to prepare a solid agreement in which he is confident he has
negotiated the best terms for his business.
Kavungya answered the question on April 12, 2021 at 15:08