Sole Proprietorship Definition
Humans have evolved through the years and became more open to the world around them. With this evolution they became more aware of their needs and wants, from the realization of their needs and wants they started to look and develop ways to satisfy them. So they started producing the goods and the services they needed according to the kind of resources they owned. However, the resources they owned did not satisfy all their needs, as they were limited.
One the other hand, they found out that others have the products they needed and they had the products these people needed. So they decided to exchange them. Then the business started, and it took different forms until it became exchange of money with goods and services. Business is the tool that makes a society developed or developing. The individuals of the society own business, not by the government. Although the government governs them and tell them what to do and set some regulations they must follow to start operating their business.
The entrepreneur (the person who volunteer’s to start the business) must first determine certain things to be able to start it. According sba. gov he has to determine the type, largeness, shape and the characteristics of his business, also the amount of authority he wants and the degree of openness to the law and the predicted earnings and the amount they expect to put into the organization again. All these characteristics determine the form of business that is suitable for them to operate and the profit and managerial role depends on the from of the business.
It sometimes depends on the personality of the owner, if he is the leader type or he maybe likes to just leave it up to the employees. The forms of business are categorized into 3 forms, the sole proprietorship, partnership and the corporation. The first 2 will be explained in details later, but the corporation is a large organization that contains a large number of owners and needs large investment and a lot of steps and procedures to form. Although sole proprietorship and partnership have many things in common their differences’ are more.
As for the sole proprietorship it is the smallest form of business as 1person is in charge of it, which means that he is completely in charge and accountable for the organization according to the small business development center. Which means that that person need a lot of courage to start this business, as he has a high risk of failing and loss every thing even his personal belongings. More over according to basics of sole proprietorship a sole proprietorship is simple to form, it requires no official records, and it takes place from trading actions and investment only.
And according to business structure all he has to do is to record a DBA (Doing Business As) and get a hold of a trade tariff license. Although, it is very easy and simple, there are also some difficulties in augmenting the money required to start the business. He has to find someone to give him the money without being an owner of the organization (so it is hard to raise money), because if he did it will not be a sole proprietorship (small business development center). Even though the owner has the liberty to employ the amount he wants of workers, he cannot attract them easily (sole proprietor magazine).
As most of the workers are at risk of being jobless anytime because the permanence of the organization is linked to the owner’s life as Roger Byrne said. As for taxes the company does not pay taxes as an organization, the owner pays them as an individual (sole proprietor magazine). Nevertheless the partnership according to the Ins and Outs of Partnership “the association of two or more persons to carry on as co-owners of a business for profit forms a partnership, whether or not the persons intend to form a partnership. ” In an attempt to develop a partnership there must be a partnership agreement.
This settlement may be verbal or on paper which is better to avoid any conflict between the partners. The agreement have to be in the form of the article of partnership and it should utter precisely what the reliabilities of each co-worker are, and what takes place if a partner resigns and any crisis that they think will happen according to PANADECTA Magazine. Furthermore it must include every situation the firm has to go through so as to start operating like the division of interest, who makes the decision as said by Ins and Outs of Partnership.
So as to be a successful business the partners should be good partners, by having resembling performance routine connected goals regarding the operation of the company (B. J. Adelson et al). A partnership is divided into two types, a general partnership and a limited partnership. A general partnership means that all its partners are general, which means that he his completely liable for every thing concerning the operation of the partnership, from the organization to the payment of the amount overdue of the company on the word of Roger Byrne.
However, as stated by Hassle Free a limited partnership consists of no less than 1 general partner and any number of general partners. The limited partners are partners who have only made cash investment, and are not responsible for the running of the organization, moreover the limited partners are not liable debts of the company and if the company losses and the business property is not sufficient enough to pay them. The general partner has to pay them form their personal possessions, but the limited partners loss only the amount they invested in the firm as maintained by Meigs, Roberts, et al.
There are other types of partners, which give them a different type of responsibility. These four types are a Silent partner is the first type; this partner is like the limited partner, he only makes a capital investment and does not share in the operation of the organization (David L. Scott). The second type is the Secret partner; this partner is the opposite of the silent partner, he can participate in the operation of the company, but the civic do not know of his existence as a partner (David L. Scott).
The third type is the Dormant partner; this partner have only contributed money in the company and share in the profit and loss, but he does not share in the management of the company and also people do not know that he exists as a partner (David L. Scott). The last type is the Nominal partner; this partner only participates by his name in the partnership, but he is responsible for the liabilities of the organization as if he was a general partner. He participates in the organization to give it a good reputation or get a good one (David L. Scott).
