Isn’t it easier and less expensive to just use a sole proprietorship or partnership?

Dear Mr.Divyesh......

When you start growing and start exploring new horisons and stressing new heights Investment in the business and source to find out a solution you will start slowly changing this opinion (not personalised). As mentined by Mr.Anayatullah Tahir APA ACMA (Finalist) share of the sole and partnership business is negligible compared to corporates.   The expenses compared to their income is quite negligible, figures not matters, percentage................A nice question asked to remind and think.....thank you

I agree with your ideal answer

thanks

The main disadvantage of doing business as a sole proprietor (one person) or partnership (two or more individuals) is the risk of liability. You have no limited liability protection like you do if operating in the corporate or LLC form. This means your personal assets are subject to being taken if someone files a lawsuit and gets a judgment against you.

As a percentage of number of businesses owned as proprietorship and partnerships are over80%. But overall economy wise public corporations are holding the biger stake may be over70%. Which means proprietorships and partnerships have some benefits along with shortcomings.

So basically the size is a determinant of the ownership structure. Liability is also a major point as mentioned by Divyesh, for those organizations which hold a liability business, eg, lawyers. So even they are not big in size but they try their best to register as LLCs (Limited liability corporations).

Thanks for inviting to answer this question; I personally feels Mr. Vinod Jetley have very well summarized the advantages and dis-advantages along with feasibility at the start up of any business venture.

With over time, the promoters needs to safe guard their commercial interest, use consultants and apply for LLC status.

Many small businesses in the United States operate as sole proprietorships, which gives the owner certain freedom and flexibility when conducting business operations. On the other hand, a business owner may choose to incorporate to take advantage of limited liability protection. Like any other type of business, a sole proprietorship and a corporation have their own advantages and disadvantages.

Advantages of Sole Proprietorship

Many sole proprietorships are one-owner businesses. An individual owns and operates the business and is responsible for all business transactions. He may or may not have any employees. He can close it, sell it or pass it down to his heirs at any time. A sole proprietor pays taxes as a part of his individual income tax filing. Some businesses may require licensing. However, the costs of obtaining a license for sole proprietors are substantially less than those for corporations. Start-up costs for sole proprietorship are very low

Disadvantages of Sole Proprietorship

The main disadvantage of sole proprietorships is the owner's personal liability for all debts incurred by the business. Creditors may come after an owner's personal assets if a small business is unable to cover debts. Sole proprietors may have difficulty obtaining business loans. Financial institutions are reluctant to lend to them as many small business loans go into default when companies struggle to stay afloat. While a sole proprietorship does not pay taxes, the owner may have to pay higher taxes as his profits increase. A sole proprietor may not deduct health insurance expenses when filing a tax return.

Advantages of Incorporation

A company does not have to be large to become a corporation. A corporation is a separate business entity that gives its shareholders several tax and legal advantages. The shareholders' personal assets are protected from the business debts of the company. A corporation can deduct the full cost of health insurance and up to $50,000 per life insurance policy on its taxes. Depending on the corporation type, shareholders may be able to avoid double taxation by choosing to pay taxes at his tax rate. A corporation can raise capital by selling stock.

Disadvantages of Incorporation

Start-up costs for corporations are higher than for sole proprietorships. Shareholders must file articles of incorporation, bylaws, corporate minutes and certificates of good standing. The state where they incorporate may require additional documents. Depending on the type of business, a corporation may need to obtain licenses and permits. Corporations are subject to double taxation. A small business pays annual taxes annual on its profits. Shareholders pay taxes on the income they receive from the profits.

Yes it is easier and less expensive to form a proprietorship or partnership business. But this is not all to be considered to decide the form of business. It should be based on the level of investments required, sources from which funds can be generated. Level of investment projects to be undertaken. Protection of owner's interest and value of their investment,etc.

Proprietorship

Depends on business nature and expansion.

If the company is small, risk is less and reward is also less, then sole proprietorship is the better option. But as the business grows and the owner wants to explore new horizons, then it is better to go for a partnership. Here risk will be high, so reward and loss both will be high but it will be shared among partners.

I agree with you 

But there are risks directly be  borne by the owner of the business 

Such as 

Financing risks 

  And legal risks

no more answers

thanx for invitation