The paper "Choosing the Type of Business in Entrepreneurship " is a good example of business coursework. Choosing the type of business is the fundamental step in entrepreneurship since it acts as a guide to other functions of the business. This begins with deciding the form of the business unit that best suits the operation as well as picking the sources of finance that facilitate its operations (Fontana 2010 p. 133). Sole proprietorship A sole proprietorship is the simplest business unit that exists operated by one natural person (Moore 2008 p. 42). It is an unincorporated business unit and therefore not a legal entity since its existence relies entirely on that of the owner.
A sole proprietor is, therefore, a person who owns the entity, takes responsibility for its transactions as well as its debts, and is entitled to all the profits of the business. Advantages: Ease of formation- sole proprietorship establishment is a quick process that requires fewer documents and costs cheap. The naming of the business also takes a simple perspective by allowing the owner to name the business after him or the option of giving the business a fictitious name for identification purposes. Decision-making- the owner has the sole power to make decisions regarding the business without any legal requirement to consult with other people. Disadvantages: Unlimited liability- this is the main disadvantage of operating a sole proprietorship business since it is not a separate entity from its owner.
The owner is therefore liable for the debts of the business and in case the debts exceed the value of the business, he pays up from his personal assets. The owner is also liable to any unlawful dealings of the business. Limited life- the existence of the business relies on the life of the owner since the business is the same entity as the owner.
The business’ life therefore ends with the death of the sole proprietor. Difficulty in raising capital- raising capital for the business depends on the creditworthiness of the owner. Partnership This is a form of business formed by two or more persons who contribute property, labor or skill with an agreed proportion of the share in profits and losses. It is an unincorporated business unit with members personally liable to the partnership’ s losses (Stickney & Weil 2006 p145). Advantages: Improved decision-making- the presence of many members ensures consultation and diversity of ideas when making critical decisions. Ease of formation- just like the sole proprietorship, partnerships is easy to establish within a short period. Ease of access to capital- the business has a wider borrowing capacity hence the ability to access more capital in form of loans. Disadvantages: Unlimited liability- partnership members have unlimited liability hence personally liable for the business’ debts in case they exceed the value of the business.
The partners’ liability is equivalent to the proportion of their share of profits and losses. Limited life- the exit or death of a partner affects the structure of the partnership. Presence of disagreements- the presence of many members translates into disagreements and a derailed decision making process. Limited company This is an incorporated business unit that is a separate entity to its owners and hence recognized by the law as a legal person (Warren, Reeve & Duchac 2011 p. 50).
Limited companies may either be private or public limited companies. Public limited companies require a minimum of two members in its formation while private limited companies can operate with one member but cannot issue shares to the public.