For new business it’s not always easy to decide which one to choose. Sole proprietorship/partnership or corporation. He needs to consider his startup financial needs, risk and the ability to grow. In regard to startup and operational complexity, there is nothing simpler than a sole proprietorship. Just register your name, start doing business, report the profits and pay taxes on it as personal income. Control over all business decisions remains in the hands of the owner. The owner can fully transfer the sole proprietorship at any time. However, it can be difficult to procure outside funding. Partnerships, on the other hand, require a signed agreement to define roles and percentages of profit. In partnership business, more capital is available and have greater borrowing capacity. Beside these, there is a wider pool of knowledge, skills and contacts. There is limited external regulation and it’s easy to change the legal structure later if circumstances change. There is also a risk of disagreements and friction among partners and management. There is a common disadvantage in sole proprietorship and in partnership business. That is sole proprietors and partners in a partnership business have unlimited liability for all debts and liabilities that occur while operating the business. This means partners and sole proprietors may lose their homes, cars and other personal assets, if the businesse’s assets are insufficient to cover the business debts. A corporation is one of the most recognizable business structers and has a separate identity from the owners of the company. One or more owners may participate as shareholders of a corporation. One of the greatest advantages of corporation is that is relatively easier to get additional capital for it. Perhaps the most serious disadvantage of corporation is that there is double taxation. The main reason people incorporate is to avoid personal liability. For most entrepreneurs, one of the most important decision is whether to be a sole proprietorship, a partnership or a corporation. A mistake in form of organization can bring long term damage to a business. I think in this case Ashfaque will go for private limited company. The main deterrent in choosing a corporation is the much larger amount of expenses and effort required in setting up and maintaining this type of legal entity. If the expense is not a problem, a corporation is quite probably the best option.
Assignment Name: Mashfique Faisal Fahim ID: 17364001 Course: BUS-503 Section: 1 Course Title: Environment & Business Instructor: Dr. Akbar Ali Khan, Professor, Brac University