Business Perspective 1
Business Perspective 1
Advantages
There is ease of forming a proprietorship and the expenses are low. In some states, it is allowed that proprietorships be exempted from double taxation as is the case in many corporations. In any case, the proprietorship could be named under a fictitious name for marketing enhancement.
The additional costs incurred during tax filing and accounting are cut down since the owner of the proprietorship is not required to file separate tax reports. All that is required is the listing of business figures and information within an individual tax file return (Moeller, 2011).
Proprietorship allows for hiring employees and enjoying the associated benefits such as tax breaks. Relatives and spouses could also be employed without formal reference to them as employees.
All the business’ decisions are in the hands of the proprietorship owner. As such, transfer of proprietorship can be made at any time as the owner deems necessary.
Disadvantages
The owner of the business is always held responsible for all the debts, losses, and business violations. For example, if the business needs to pay debts, the owner must satisfy the demand from their personal funds.
Despite the many tax benefits coming along with proprietorship, there is the incurrence of self-employment tax as well as other health insurance premiums for all their employees.
Proprietorship lacks continuity in case the owners become deceased. In such cases, the businesses are liquidated and treated as part of the personal estate of the owner.
It is difficult to raise initial capital in proprietorship business (Moeller, 2011).
Partnership
Advantages
The businesses are better founded since two minds or more are better in productivity than one.
Start-up costs and the efforts to establish partnerships are low.
The business is always at more potential due to more available capital as well as the higher borrowing capacity (Byrd & Meggisnon, 2012).
The employees that are of high caliber can be made partners increasing productivity.
Partnerships provide the opportunity for splitting their income, especially in that resulting from tax savings.
External regulations are limited and the affairs of the partners are kept private.
It is very easy to change legal structures as compared to other business structures.
Disadvantages
The liabilities of the involved partners in terms of business debts are unlimited.
All the partners are liable severally and jointly for the partnership debts for their amount of share in the partnership debts.
Disagreement risks and friction in the management of the businesses are high.
All partners are liable to the actions of the other partners.
There is a high cost in valuing all the assets of partnerships in case one of the partners decides to leave or another decides to join (Moeller, 2011).
Corporation
Advantages
The shareholders in a corporation are never held liable for any debts or judgments made against the corporation.
Corporations may raise funds by selling out their shares in case there is a need to do so.
They have the authority to deduct the benefits provided to officers and employees in case of a crisis.
Disadvantages
More money and time is required for the formation of corporations.
Government agencies monitor corporations resulting in additional paperwork.
Corporate profits are subjected to higher taxation rates since the government taxes such profits at corporate instead of individual levels.
Limited-Liability Company
Advantages
There is the allocation of flexibility where the amount of money invested in the enterprise does not rely on the amount of percentage of their ownership.
The number of owners in limited-liability companies is not limited by any legal structures.
There is freedom in the management of such companies since they are not required to have a board of directors (Moeller, 2011).
Disadvantages
There is a need to work hard in finding investors and capital sources since the limited-liability companies cannot issue stock in an attempt to increase their funds.
Cooperative
Advantages
Cooperatives are able to buy advertising and pay for other marketing forms at advantageous rates.
Cooperatives accord their members with a purchasing power by pooling resources while purchases are being made and also connecting members with the benefit of volume discounts (Byrd & Meggisnon, 2012).
Disadvantages
When purchasing through cooperatives, there is the aspect of sharing the products and the prices with the competitors.
Marketing through a cooperative leads to the loss of business brand due to generic marketing.
Joint Venture
Advantages
Entering related businesses is faced with very high barriers to entry.
Companies are able to leverage the technologies developed and patented by other companies.
Disadvantages
It is easy to make poor tactical decisions due to misunderstanding resulting from the roles of every company.
There is difficulty in coping with the different management styles, cultures, and working relationships prevailing in the different companies.
Assistance to Small Firms by Government
The government provides free advice reducing the cost incurred from intermediaries. Government officials are responsible for advising the owners of businesses on their services and programs (Byrd & Meggisnon, 2012).
Government agencies facilitate customer research by providing invaluable resources to the small firms.
Inviting the government to participate in the activities of your small business draws media attention leading to public recognition (Byrd & Meggisnon, 2012).
Five Ways for Small Firms to Cope with Regulations
All businesses are required to comply with the regulations set out by the government (Liss, 2007). Some of the ways of coping with the regulations include:
Ensure that the business name is registered and licensed.
All the workers offering services in the firm must be well compensated.
There must be permission to conduct business in any other way other than a sole proprietorship (Liss, 2007).
All sale taxes must be collected and the employee wages must be withheld for taxation.
The business must also ensure health and safety for all the customers and employees.
References
Byrd, M. J., & Megginson, L. C. (2012). Small Business Management. An Entrepreneur’s Guidebook (7th ed.). McGraw-Hill.
Liss, R. (2007, February 27). The Ethical Edge. CNN. Retrieved from http://money.cnn.com/magazines/fsb/fsb_archive/2007/03/01/8402024/index.htm
Moeller, R. R. (2011). COSO Enterprise Risk Management: Establishing Effective Governance, Risk, and Compliance Processes (2nd ed.). Hoboken, N.J: John Wiley & Sons.
