Comparison of Sole Proprietorship, Partnerships and Corporations

This essay compares the features of three forms of business units which are partnerships, sole proprietorships and corporations. It discusses their advantages, disadvantages, and differences in formation, capital contribution, and dissolution.

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Business Units
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Introduction
A business unit is an organization or part of the organization that operates
and functions independently. It is a profit making unit which is focused on market
segments and enhancing production of a firm. This essay compares the features of
three forms of business units which are partnerships, sole proprietorships and
corporations.
Sole proprietorship
It is a business that is owned by one person. The owner enjoys the profit
alone since they are personally liable and takes risks too. In this type of business, a
small amount of capital is needed to start. A sole proprietorship has the following
advantages; a few legal procedures are involved in forming it, sole proprietors make
decisions on their own and have full control of the business (Döckel and Ligthelm,
2015, pp.59). More so, this type of business has disadvantages which include, taking
all responsibilities and decisions of the business, the owners suffer loss alone, it can
be difficult for the owners to raise capital on their own. In a situation where the
owner dies, there is discontinuity of the business (Sarmento and Renneboog, 2016,
pp.101). This type of business also has unlimited liability that is if the owner has
business debts, their personal assets can be used to pay off the debts.
Partnerships
They are types of businesses that are owned by two of more people. The
source of capital in this type of business is through contributions from the partners.
Each partner is liable to the debts of the partnership. A partnership has the following

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advantages; the initial capital is contributed by each partner making it easy to raise
capital, the partners share both losses and profits, there is better decision making
since different views from the partners are shared before coming to an ultimate
decision (Foret and Klusáček, 2014, pp.81). While partnerships have many benefits,
they also have a number disadvantages; the business has unlimited liability, conflict
and differences among partners which may occur during decision making, continued
disagreement among partners may lead to dissolution of the partnership and lastly in
the event of death, resignation, or retirement a partnership may dissolve
automatically.
Corporations
Are businesses formed by groups of people, and they have rights and
liabilities which are separate from those of the individuals involved. They pay
investors through dividends and its ownership is based on the number of shares
owned (Marquis, Davis and Glynn, 2013, pp.43). Some of the advantages of
corporations are; limited liability experienced by the owners, transferability of
shares of ownership, corporations have got continuous existence unlike sole
proprietorship where death of owner leads to its dissolution. Business Corporation
has some disadvantages which include; there are many legal procedures to be
followed before commencing business, they are difficult to dissolve since
everything is regulated from formation, operation to dissolution. Also it may
discourage creditors due to their limited liability.

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Conclusion
The business units discussed above; sole proprietorship, partnerships and
corporation are distinct in various ways such as, formation, which explains the
procedures to be followed for them to operational, capital contribution, that is where
the initial capital comes from, and dissolution, which outlines different ways and
causes that may put an end to a business unit or the procedures to be followed.

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Bibliography
Döckel, J.A. and Ligthelm, A.A., 2015. Factors responsible for the growth of small
business. South African Journal of Economic and Management Sciences, 8(1),
pp.54-62.
Foret, M. and Klusáček, P., 2014. The importance of the partnership and
cooperation in the regional development exampled on Znojmo region. Acta
universitatis agriculturae et silviculturae Mendelianae Brunensis, 59(4), pp.79-86.
Marquis, C., Davis, G.F. and Glynn, M.A., 2013. Golfing alone? Corporations,
elites, and nonprofit growth in 100 American communities. Organization
Science, 24(1), pp.39-57.
Sarmento, J.M. and Renneboog, L., 2016. Anatomy of public-private partnerships:
their creation, financing and renegotiations. International Journal of Managing
Projects in Business, 9(1), pp.94-122.