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Business Enterprises

There are various types of business enterprises.

1) Sole Proprietorship

A sole proprietorship is an unincorporated business owned by one individual. It is the simplest type of business which legally has no separate existence from its owner. The term conjures up a mom and pop establishment up the street, the café next door. The owner, who is the sole financier has complete control over the business and there is no distinction between the business income and personal income and as such all the income is taxed as personal income. It is usually run as a personal or family business where the ownership and the management is the same.

Advantages of Sole Proprietorship

 Easy to set up – simple and inexpensive to set up
 Low start up costs – start up costs are usually very low
 In most countries there is minimal registration requirements
 Owner / Sole Proprietor has complete control
 There are also minimal government regulations / stipulations to follow
 Tax Advantages – lower tax rates and losses may be applied (in the UK they enjoy lower National Insurance Contributions)
 Business Continuity – Business life continues until the owners death and / or until they decide to dissolve it
 Credit and Financing – If the owner of the business needs credit and financing from a bank, and they have a good credit standing with the bank, then getting credit will be a lot easier
 Independence in control over the affairs of the company
 No disclosure is required for company documents and financial statements
 Records do not require an audit at the end of the financial year
 All profits can be withdrawn from the company at any given time
 Cessation of the business is simple

Disadvantages of Sole Proprietorship

 The owner bears unlimited liability for the operations of the business and should the business fail, the debts and liabilities are completely the responsibility of the owner. This can go to the extent of auctioning the owners personal...