Analyzing different forms of organizations
Sole trader (profit based)
Description
It is the most common kind of business as it is easy to set up (can be started up with
very little start up capital) and is inexpensive. It entitles you to be legally responsible for
all aspects of the business (a lot of pressure) you have unlimited liability meaning that
you become personally liable for all of the business debts. You are your own boss. You
choose who to employ and how you want to run your business. You can choose to work
alone or employ others to help run the business.
Who has ownership? Control?
You become a self-employed sole trader. As a sole trader, you run your own business
as an individual. You have complete ownership and you can keep profits after you've
paid tax on them.
Sources of finance (where do they get money?)
In a sole proprietorship, the sole owner gets to keep all the profit. If you chose to employ
people you pay them from the profits you make.
How are profits distributed?
One man business. Generally small unless you choose to expand it and employ others.
Advantages-
The main advantage is that since you are the only owner you can be your own boss
make all the decisions and run the business however you want. You get to keep all the
profits. Another advantage is that usually the business doesn't require a lot of start - up
capital as its generally small.
Disadvantages-
There is unlimited liability on the sole owner. Meaning that the government won't
differentiate between you and your business. In other words if someone sues the firm
they are suing you as well, your house and personal belongings can be sold in order to
settle the claim.
Interesting facts:
Single Ownership: A single individual owns the sole proprietorship! That individual owns all the assets
and properties of the business. He alone bears all the risk of the business.
No sharing of profit & loss: The entire profit out of the sole proprietorship business goes to the sole
proprietor. If there is any loss, it is also borne by the sole proprietor alone. Nobody else shares any of
the profit and loss of the business.
Sole trader (profit based)
Description
It is the most common kind of business as it is easy to set up (can be started up with
very little start up capital) and is inexpensive. It entitles you to be legally responsible for
all aspects of the business (a lot of pressure) you have unlimited liability meaning that
you become personally liable for all of the business debts. You are your own boss. You
choose who to employ and how you want to run your business. You can choose to work
alone or employ others to help run the business.
Who has ownership? Control?
You become a self-employed sole trader. As a sole trader, you run your own business
as an individual. You have complete ownership and you can keep profits after you've
paid tax on them.
Sources of finance (where do they get money?)
In a sole proprietorship, the sole owner gets to keep all the profit. If you chose to employ
people you pay them from the profits you make.
How are profits distributed?
One man business. Generally small unless you choose to expand it and employ others.
Advantages-
The main advantage is that since you are the only owner you can be your own boss
make all the decisions and run the business however you want. You get to keep all the
profits. Another advantage is that usually the business doesn't require a lot of start - up
capital as its generally small.
Disadvantages-
There is unlimited liability on the sole owner. Meaning that the government won't
differentiate between you and your business. In other words if someone sues the firm
they are suing you as well, your house and personal belongings can be sold in order to
settle the claim.
Interesting facts:
Single Ownership: A single individual owns the sole proprietorship! That individual owns all the assets
and properties of the business. He alone bears all the risk of the business.
No sharing of profit & loss: The entire profit out of the sole proprietorship business goes to the sole
proprietor. If there is any loss, it is also borne by the sole proprietor alone. Nobody else shares any of
the profit and loss of the business.
