Comparative Analysis of Differenet Forms of Business

AHSAN JAVED 11P0023 MBA 1(A) Assignment 1 Corporate Finance Submitted to: Sir kumail Rizvi Comparative analysis of different forms of business organization Ownership A sole proprietorship has only a single owner. A partnership has two or more owners. A corporation can have an unlimited number of owners. Liability In Sole proprietorship the liability is unlimited; owners are responsible for whatever profit the business gets and whatever loss the business incurs. In partnerships the profits and liability are distributed between the two or more owners according to their shares. In Corporations there is limited liability, and in case of failure shareholders may lose their investment but he/she will not be liable to any debts of the corporations. Life of the business The life of the business in sole proprietorship depends on the life of the owner. In partnerships, it ends with death, bankruptcy of partner. In corporations, a corporation does not expire upon the death of its shareholders, directors or officers. Excess to Capital In Sole proprietorship the excess to capital is very limited. In partnerships the excess to capital is more then sole proprietorship but much less then corporations. Corporations have excess to great amount of capital. Management In sole proprietorship, single owner does all the management of the business. In partnerships, owner’s agreement on management is required. In corporations, board of directors appoints the management team. Ease of setting up Sole proprietorship is quite easy to setup and there are usually no legal agreements required. Partnerships are also easy to setup but there are legal agreements between the owners and usually some paperwork required. Corporations are more difficult and costly to set up, often requiring state applications, legal paperwork such as articles of incorporation, board resolution and affidavit. Tax Structure In Sole proprietorship, the business and the owner is treated as one so the tax is being filed on the owners income. In partnerships the tax is being filed on the incomes of the partners. In case of corporations, the tax is being filed on the shareholders on the dividends they receive as well as on the income of the corporation.