Sole Proprietorship business is one that is formed and run by one individual and has no legal distinctions between the entrepreneur and the business. Advantages include, complete control and decisions making powers, sale or transfer is at the description of the owner, no taxes, minimal capacity requirement, ease of dissolution, and few formal requirements. Disadvantages include no business continuity once owner dies, the owner bears all the loss burden alone, sole loan liability since he is the only person in the business, and limited sources of capital because of the lack of legal documents and a limited re-payment capacity. The dissolution of a sole proprietorship is straightforward because they do not require formal state registration dissolution will only involve paying off debts, ensure records are maintained for tax-filling purposes, and closing all creditors accounts (Hult, Hurley & Knight, 2004).
Partnerships is a type of business where or more people pool their resources to form a business and share the profits and losses in accordance with the terms of the agreement. Advantages include, more capital base, low star-up costs, running of the business is private, limited to government regulations, and easy to change their legal structures. Disadvantages include limited liability for debts, risks of disagreement and friction between partners may emerge due to lack of trust, both partners are liable for the mistakes of the other. Losses are shared by the percent of ownership by both parties. Dissolution of a partnership involves the following steps. Review of the partnership agreement, discussion with other partners, filling of dissolution papers in court, notification of other partners, suppliers and creditors, and settling to close all the accounts (Hult, Hurley & Knight, 2004).
Limited Liability Company is a separate legal entity, therefore the company can get a tax identification number, hold a bank account and conduct business under its name although it is not formed as a corporation. A limited liability company should have an operating agreement, which defines the reason and purpose of the business formation, how its members work and other vital details that explain what happens in various circumstances. Advantages include limited personal liability, the simplicity of running the business, own structure determination, the involvement of all members, attracts foreign investments, and the company can afford a wider capital base because it is legally recognized and can use its assets to secure substantial amounts of credit. Dissolution of the limited liability company is costly and takes a lot of time because specific procedures must be followed such as filling for a certificate of dissolution, notifying creditors, and resolving claims (Hult, Hurley & Knight, 2004). Dissolution of the corporation requires a formal proposal by the directors at a board meeting and should be recorded in the minutes of the corporation, an approval by the majority of shareholders, and the filling of the dissolution within 30 days after which the resolution to dissolve was adopted. A tax clearance certificate is also required by most states around the world.
A Corporation is a separate legal entity governed by a group of a board of directors. Advantages include limited liabilities because the shareholders of the business enjoy limited liability up to a certain amount of their property, can raise substantial amounts of profits from the seal of bonds and shares and enjoys a perpetual life because ownership can be passed through many generations of willing investors. Disadvantages include, they may be double taxed, excessive tax fillings, because of their diverse types of income, revenue and other types of taxes that should be paid require large amounts of paperwork, and they corporation enjoys independent management, therefore, the investors have no clear interest. The business can be operated by the management without real owners oversight (Hult, Hurley & Knight, 2004).
Hult, G. T. M., Hurley, R. F., & Knight, G. A. (2004). Innovativeness: Its antecedents and impact on business performance. Industrial marketing management, 33(5), 429-438.
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