Advaced Business Structures Essay Example | Topics and Well Written Essays - 2000 words

Advaced Business Structures - Essay Example Most cities and many countries require businesses - even tiny home-based sole proprietorships to register with them and pay at least a minimum tax. And if you do business under a name different from your own, such as a custom coding, you usually must register that name - known as a "fictitious business name" with your country.1. Cheap Setup Cost - There are no legal complications in setting up a sole proprietorship. There are no minimum or maximum limits for capital thus even qualifying small business units with less capital as a Sole Proprietorship. The business is flexible in its operations as it can engage in any other operations without any restrictions as it may be in the case of Limited Companies.2. Reduced Operating Costs - Sole proprietorships are easy to setup and to maintain. Much of the running of the business is done by the owner, saving on labour costs as there is no requirement to hire professional help.3. Avoidance of Corporation Tax - At the time of paying income tax, a sole proprietor simply reports all business income or losses on his or her individual income tax return. The business itself is not taxed. Sole proprietor is not required to pay Corporation Tax because it is not a separate legal entity from its owner, so the business will not be taxed separately.... For instance, if you're engaged in a low-risk enterprise such as freelance editing, landscaping or running a small band that plays weddings and social evens, your risks of facing massive debt or a huge lawsuit is pretty small. 5. Subject to Governmental Regulations - As stated above, there is no regulation on minimum or maximum capital, the sole proprietorship is not required to file its accounts with the registrar of companies, there is no need to produce memorandum or article of association. There is also no compulsary audit as it is the case with Limited Companies. Disadvantages of Sole Proprietorship 1. Failure to raise funds - Many financial institutions consider sole proprietorship as risky ventures and are not willing to extend finance to these entities. Sole proprietor may not be able to raise capital on his own unlike in partnership where they are able to share the financial burden of raising funds. 2. The Proprietor has unlimited liability - The liability of the sole proprietorship is bound to the proprietor since this type of business is one with its owner. Therefore the liability of the business is ultimately the liability of the proprietor. Since there is no law binding the owner regarding limited liability, this can prove to be fateful if the owner takes a huge loan and cannot repay. 3. Lack of Business Skills - The proprietor does not avail the services of any professional, hence conducting the day-to-day business on his own. In many businesses, the lack of the proprietor's experience would be detrimental to the health of the business unlike a Public Limited Company, where professionals are hired to conduct the day-to-day business. Partnerships