Proprietorship, Partnership and Limited Company
This is first important step to building a successful business, it is important that we as entrepreneurs get it right from the starting point of the business.
Choosing the right type of business saves you time, money and above all it will enable the avoidance of making costly mistakes, which are associated with choosing the wrong type, such as legal fees—for the correction of the mistake made in the first instance.
In many lands in the world, there are three major types of business:
This is the type of business that is started and managed by a single person. Like every type of business it has its advantages and disadvantages and those are:
It is easy to start
It easy to manage
You work at your own pace and willKeep all profits to oneself
Personally supervise the operations and insure high levels of product excellence
Insecurity of the business—the business comes to a stand still went you are sick or when you have other commitments like attending your children’s science project.
In case of death, the business seizes to exist once the owner dies.No one to share loses with, when the business is suffers a loss.
There are unlimited liabilities, meaning that when you borrow money as the owner of the business and fail to repay back, the bank can claim your personal properties.
A partnership is a business that is formed when two or more people put their resources together for the sole purpose of making a profit.
The Advantages include:
Two or more people run the business together
Losses are shared between partners
You have time for vacations and other important things as your partners can take care of the business when you are not available.
You and your partners can use your different skills or abilities to the proper management of the business.
Disadvantages of partnershipThe business sizes to exist once a partner dies.
In case of a dispute between partners, the business can suffer great losses and lead to its collapse.
There is no limited liability ( though some countries have limited partnerships)
This is a company whose members have limited liability—meaning that they are not responsible for the debt incurred by the company during business.
The company can hire professionals to run the day-to-day business activities.
Members have limited liability.
It’s easier to borrow money from lending institutions like banks.
It owns assets
Double taxation—members are taxed on their income and the company is taxed at the same time
If the members of the company drop to below two, then the company will be forced into involuntary wound-up (that is forced closer of the company)
Reardless of what business type wither propriatorship,partnership or any other, you need a good business budget.
Clearly you should choose the right business depending on the advantages and disadvantages of the type of business you want to pursue.