The sole proprietor keeps all the proýt made by the business but is responsible for any losses. This is called unlimited liability , meaning they might have to sell personal items like their house to cover debts. Sole proprietors are often called entrepreneurs, and the business usually has one person’s name, like Mario’s Café.
TABLE1 Advantages and disadvantages of a sole proprietorship business Advantages
Disadvantages Unlimited liability
Simple and low cost to start
Owner has full control and keeps all proýt
Owner must perform multiple roles
Minimum regulations
Long hours because success depends on effort
Partnership
A partnership is a business owned by two or more people, called partners. They share proýts and losses equally and make decisions together. Some partnerships can have only two partners, while some have over 400. Partners don’t have to work for the business (they are known as silent partners). Proýts are shared between partners based on how much money they contributed to start the business. Partnerships are common among doctors, accountants and lawyers. The business name often includes the partners’ names, like Kennedy & Lee Lawyers. Like sole proprietors, partnerships have unlimited
FIGURE4 Partnerships are businesses run by two or more people.
liability, meaning partners are responsible for debts. A partnership can start with a verbal agreement, but it’s better to have a written one. This agreement says how proýts will be shared, how decisions will be made and what happens if the partnership ends.
TABLE2 Advantages and disadvantages of a partnership Advantages Inexpensive and simple form of ownership Partners can share the responsibility for decision- making, the risks and the workload Partners can pool their ýnances and their expertise
Disadvantages Unlimited liability
Finding suitable partners can also be difýcult
Disputes between the partners can arise
Minimal government regulation
Future of business can become complicated if partners decide to leave
Corporation A corporation, or company, is owned by shareholders. In Australia, corporations are incorporated, making the business a separate legal entity. This means the corporation, not the shareholders, is responsible for its debts.
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