Q1) How is a sole proprietorship created?

Q.2 What are the advantages and disadvantages of a partnership?

Q.3 How can a partnership come into existence?

 

A sole proprietorship is a type of business structure that is owned and managed by a single individual with no legal Separation between the owner and the business. This means the owner will enjoy all the profits on his own but has to handle all other responsibilities such as taxes and debts.

 

A partnership is a formal arrangement by two or more parties to operate and manage a business and share its profits. The partners can either share the profits equally or have limited liability.

Step-by-step explanation

Question 1: How is a sole proprietorship created?

starting a sole proprietorship is almost very simple. All you need is;

• create and decide a business name which has not been used by any other business establishment or entity.
• Decide on the location and register the business with the local, state or federal government. This helps to make the business legitimate.
• Obtain all business permits and licences from the local, state or federal government. This subjects the business to safety standards, taxes and any other government requirement.
• If the business plans to sell taxable products or services it will need to register with the state's taxing authority.
• If the business plans to hire employees it has to get an Employer Tax ID Number.

 

 

Question 2: What are the advantages and disadvantages of a partnership?

Advantages of a partnership

1. Its less formal with fewer legal obligations.

- It lacks formality and has fewer records to maintain. The partnership can be dissolved any time and gives partners the choice to either leave or stay if they wish to.

2.Easy to start

- The partnership can be created either verbally or in writing. Registering is quite simple, does not require a lot of paperwork and the start -up costs are low.

 

3.There is sharing of the burden

- By working in a business partnership you can benefit from companionship and mutual support. This means you are in it together.

 

4.There is access to knowledge, Skills, experience and contacts

- There is a better chance of Success as each individual partner brings to the table their knowledge, skills, experience and contacts. Tasks are shared according to the partner's specialits.

 

5.Better - decision making

- Two heads are better than one.

 

6.There is privacy

- The business affairs are kept confidential by the partners.

 

7. Ownership and control are combined

- In partnership, the partners both own and control the business. They get to agree on how to operate, run, manage and control the business without any inteference from anyone. This makes the partnership very flexible and have the ability to adapt to adapt more quickly to changing circumstances.

 

8.Easy access to profits

- The profits are shared between the partners. They flow directly through the partner's persona fax returns and are not retained within the partnership.

 

9.More partners more capital

- More capital is available for the business.

 

10. There is high borrowing capacity.

 

11. prospective partners

- High calibre employees could become parties in the business.

 

 

 

Disadvantages of a partnership

1. The business has no independent legal Status

- Incase of resignation or death of a partner, the business will have to be dissolved. this causes in security and instability and divert the attention of the partners from developing the business.

 

2. unlimited liability

- Due to lack of legal independence, the partners are at risk of their personal assets being seized incase the business runs into trouble with creditors as they are jointly and severally liable.

 

3. potential differences and conflicts

- There is lack of autonomy in a partnership. The partners have different views on how the business should go and on how to handle any issues that arise.

 

4.Limits on business development

 

5. Taxation

- All the profits earned by the partners are translated to income that is taxable.

 

6. profits must be shared

- profits are shared equally and this raises conflicts as different partners input different skills and effort into the business.

 

7. slower and difficult decision making

- All matters need to be consulted and discussed by all partners before a decision is made. Incase of a disagreement, more time is spent negotiating in order to reach an agreement. Some opportunities might be lost due to this.

 

8. The part heis are agents of the partnership hence they are liable for actions of other partners.

 

 

Question 3:How can a partnership come into existence?

- A partnership comes into existence of as a result Of implied agreement between the partners which can either be oral or written.

-some factors must be present to determine the existence of a partnership. They include;

• The formal registration of the partnership
• The contribution of money, properties, knowledge, skills or any other assets to the business.
• The right to share in profits and losses in the business.
• The ownership and control of the partnership's property.
• The rights of the parties at dissolution.