We can rule out certain entities based on their responses and a...

 

We can rule out certain entities based on their responses and a sole proprietorship is for 1 person only so that is ruled out right off if there is more than one person. Do you think a partnership that is 2 family members or 2 friends more likely to survive than a partnership with 2 strangers that came together?

Not really.  

I used to work as an auditor for a small auditing firm.  We had partnership clients who are family members.  I remember one client we had where the father and her daughter formed a partnership and engaged in a business that distributes grocery items to retail stores all over the city.  The business at the start earned a lot of income because they were able to acquire exclusive distributorship contracts with some well known consumer brands.  Being partners as such, the father manages the operations side of the business while the daughter became incharge of the treasury functions.  Since the father trusted his daughter so much, he no longer installed good operational internal controls over cash receipts and disbursements.  There soon came a time when the father noticed that they were running short of cash inspite of the collections being on time.  They engaged us to audit the company and we found out that the daughter has stolen large amounts of cash over the years.  The father was placed in a very difficult decision of deciding whether to file charges against her daughter and put her to jail or forgive her.  He eventually forgave her because he loved her daughter so much.  The company eventually went bankrupt and closed down.  You see, oftentimes the personal relationship between family members and friends get in the way of the success of a business.  When friends and family come together to engage in business, they oftentimes make unprofessional decisions because of their personal relationship with their partners.  Sometimes its better to enagae in business with a stranger because you tend to become more cautious and in order to ensure that your interests are secured, you install a good system of internal control.