BUSINESS LAW Essay Example | Topics and Well Written Essays - 3000 words

BUSINESS LAW - Essay Example Sole proprietorship This form of business organization is one that is organized under the management of an individual. The organization only depends on the contribution of the individual. The setting of this particular organization is based on contribution and profit sharing by an individual. However, this form of business setting can have support from family members or sponsors which do not reflect on the formal participation in the creation of the business entity. According to Ray (2001) sole proprietorship is a creation of a decision making process by one person. He further points out that, this form of business organization survival does not depend on contributions from donors or business partners. Additionally, a sole proprietor may use a business name apart from his legal name to represent his business entity. Ray (2001) points out that the sole proprietor owns all the assets in the business. In describing the formation and operation of a sole proprietorship, Pettet (2005) says that it is only more that buying and selling of services and goods. He further points out that the description of the activities in the business is automatically shaped by the owner’s activities. In this business form, taxation is only done on the business as the source of income for the owner. The owner is not further taxed as an individual. Additionally, the location of a sole proprietor business is decided by the owner and it is not dictated by any law. Advantages (Besley & Brigham, 2008) There are few legal formalities that are involved in its creation There is no profit sharing as the entire profit generated is taken by the proprietor The business entity can benefit from contributions by family members and relatives The capital required for the creation of a sole proprietorship is minimum compared to the amount required for the creation of other business entities. Operating challenges are minimized since no complex record keeping systems are required The unlimited liabi lity status of the owner attracts creditors Disadvantages (Besley & Brigham, 2008) The proprietor incurs all the loss that may be generated by the organization The exposure of this form of business to sponsors is minimized The proprietor is the sole contributor of the capital required The continuity of this form of business entity is made unpredictable. For instance, if the proprietor dies the business may be dissolved There is a minimized exposure to talent and expertise General partnerships This form of business is based on skill and resources contribution by two or more people (Pettet, 2005). Partnerships are legally registered as business creation by two or more people. The contribution by each partner should be voluntary and the contribution by each partner is legally recorded. Such business entities are legally bound by rules and regulation created by governments. The contribution of resources and capital may vary in terms of quantity but must be on agreeable terms and compens ation conditions. The contribution by a partner dictates the sharing profit ratio: the highest contributor of capital and resources get a greater share of the profit. Name of partners, loss and profit sharing ratio, name of partnership, capital of the business of the entity and the provisions in settling differences are the constitution of the legal provisions of general partnerships