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Business form of doing business Essay Example

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Business form of doing business

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Mainly, there are four business forms of doing business including sole proprietorship, corporations, partnerships, and limited liability companies. Each business form of doing business has its legal and ethical aspects of management. It should be noted that while most of these aspects may be unique to the specific business forms, there are some aspects that are overlapping between different business forms of doing business (Madura, 2007).The first business form of doing business is sole proprietorship. Sole proprietorship is the form of doing business where a person owns all the business’ assets and enjoys all the profits, as well as being liable for all the business’ debts and other liabilities. The business owner does not incorporate or establish a limited liability company but instead run his business in his own name (Jennings, 2012). Numerous existing data indicate that sole proprietorships are the most common of all forms of doing business. This can be attributed to the fact that it is simple to start or form and operate, in addition to enjoying management flexibility. Also, it is most common because it is subject to fewer taxes and fewer legal controls. A business that has been organized as a sole proprietorship is considered not to be separate from its owner (Mongalo, Lumina and Kader, 2004). It can be organized with merely a different name than with which the owner represents himself with to the public. The fact, however, remains that the business and its owner are inseparable. Due to the nature of the relationship of this form of business, a sole proprietorship is a pass-through entity where all expenses and income pass-through to, and is filed as those of personal return of the owner. In an event of loss, the owner will enjoy a deduction aimed at offsetting personal income. On the other hand, if the business makes a profit, its owner is responsible for taxes due (Pride, Hughes, and Kapoor, 2011).Sole proprietorship has a number of advantages and disadvantages. Since it has fewer legal requirements, it is not only easy to form, but also to operate. It is more affordable because in most cases there are no legal documents that are needed to be filled. Often, all that one has to do while forming a sole proprietorship is to obtain a business license and start operations (Halbert and Ingulli, 2009). Additionally, sole proprietorship has the advantage of simplicity as it is less complex in formation

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