A sole proprietorship has a major advantage due to the simplicity of setting up this type of
entity compared to all others. A person simply becomes a sole proprietor by running a
business. Another advantage would be that the owner will have 100% ownership of the
business and control as well. A sole proprietor can only have one owner and the owner is
entitled to all profits as well as full control of the business. However, a disadvantage would
be the liability of the business. The owner of a sole proprietor is held responsible for all
liabilities related to the debt and obligations of the business. This means that the owner
could have to pay out on his personal accounts, assets, or property to cover all debts.
A partnership has the advantage of obtaining capital easily. Due to the cost of starting a
business from the ground up, this will allow many more opportunities for the business to
obtain capital from various resources. A partnership allows an individual to not carry all of
the burdens when providing capital due to the capital is dispersed between all members of
the partnership. This will allow for an increase in overall financial security and cash flow for
the business. Another advantage would be taxation on a partnership. You will only pay taxes
on your share of the business and everyone involved would pay their share of the taxes.
Therefore, you will file and pay taxes on your share of the business which will reduce the
overall burden of having to pay all taxes for the company. A disadvantage of a partnership
would be the decision-making of the company. Everyone will need to come to an agreement
otherwise nothing will happen. This is considered a disadvantage due to people involved can
have different ethics and can cause clashes over matters.
Lastly, we have corporations that are known to have many long-term advantages. One
advantage would be the many investors that could be obtained within the corporation which
will allow the corporation to strive and continue. A corporation would also be able to obtain
a large amount of capital compared to a partnership by simply selling shares and issuing
bonds, especially if the corporation is publicly traded. The biggest disadvantage would be the
likely double taxation that it may face. This is done by a corporation paying taxes on its
income and then the shareholders having to pay taxes on the dividends it received from the
corporation which would make double taxation exist.
Therefore if I was to open a construction company I would make the decision to run it as a
sole proprietor due to the simple fact the construction company will be small which would
make it very manageable for one person to run.
Bragg, S. (2021, June 25). Corporation advantages and disadvantages. AccountingTools.
https://www.accountingtools.com/articles/corporation-advantages-and-disadvantages.html.
Business partnerships: What you need to know.
Business News Daily. (n.d.). https://www.businessnewsdaily.com/15746-business-
partnership-pros-and-cons.html.
