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Forms of Business

Forms of Business

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Published by Joynul Abedin
Forms of Business
Forms of Business

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Published by: Joynul Abedin on Aug 01, 2012
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11/21/2012

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Forms of Business
Have you ever wondered exactly what the difference is between a partnership, a business, and a corporation?
Business
is the all-inclusiveterm we use to mean, basically, a group of people working together tomake profit.
Here are some of the different forms of businesses:
Sole Proprietorship
'Sole' means single and 'proprietorship' means ownership. It means onlyone person or an individual becomes the owner of the business. Thus,the business organization in which a single person owns, manages andcontrols all the activities of the business is known as sole proprietorshipform of business organization. The individual who owns BusinessStudies and runs the sole proprietorship business is called a ‘sole proprietor’ or ‘sole trader’.A sole proprietor pools and organizes the resources in a systematic wayand controls the activities with the sole objective of earning profit. Isthere any such shop near your locality where a single person is theowner? Small shops like vegetable shops, grocery shops, telephone booths, chemist shops, etc are some of the commonly found sole proprietorship form of business organization. Apart from trading business, small manufacturing units, fabrication units, garages, beauty
 
 parlors, etc, can also be run by a sole proprietor. This form of businessis the oldest and most common form of business organization.
 According to J. K. Hanson
, “
Sole proprietorship
is a type of businessunit where one person is solely responsible for providing the capital,for bearing the risk of enterprise and for the management of the business.”
Characteristics of Sole Proprietorship
The following are the main characteristics of a sole proprietorship:
Single ownership
The most important characteristics of sole proprietorship are that theownership management and control of the organization is vested withthat individual only.
Capital contribution
In this form of business organization, the capital is contributed by thesole proprietor from his own resources. If he requires more finance, itmay be borrowed from his friends and relatives. Thus the invite burdenof capital requirement for this business is the sole responsibility of theowner. He may arrange it from its own or by borrowing of his own risk.
No separate legal existence
 No distinction is made between the enterprise and its owner and bothare looked upon as one any same person. Death or insolvency of thesole proprietor brings his business to an end.
One-man control
The sole proprietor is personally responsible for the control andmanagement of enterprise. There is no interference from any person inthe management. He has full authority to take decisions for guiding thedestiny of the enterprise. Thus, sole proprietorship is a one-man show.
Unlimited liability
The liability of a sole proprietor is always comprehensive andunlimited. The personal property of the proprietor would also be usedto pay off the debts and loans of any incurred from the outsider if the business assets one insufficient to meet such of outsiders in caseliabilities of the enterprise cannot be paid out of assets of the enterprise.This provides a check on the reckless actins of the sole proprietor.
 
Limited area of activities
As a result of limited finance and managerial ability, the sole proprietor has a limited area of operation. Unlimited liability also restricts the proprietor from taking bold decisions and expands its area of operations.
No legal formalities
There are no legal formalities in order to start a sole proprietor form of  business. Anybody and everybody can start the business any time anyeverywhere so also they can dissolve the same as per their wishes.Because it is subject to minimum legal formalities and governmentrestrictions but full delineation of sole trader.
Freedom of line of business
The sole proprietor is free to select any business of his choice. It provides an excellent opportunity for self-employment, especially for those who have limited amount of finance. He can easily switcher andexpand its business activities. He has the liberty to decide everything of his own.
Advantages of Sole Proprietor Form oBusiness
Easy formation
The formation of sole proprietorship business is very easy and simple. No legal formalities are involved for setting up the business excepting alicense or permission in certain cases. The entrepreneur with initiativeand certain amount of capital can set up such form of business.
Direct motivation
The entrepreneur owns all and risks all. The entire profit goes to his pocket. This motivates the proprietor to put his heart and soul in the business to earn more profit. Thus, the direct relationship betweeneffort and reward motivates the entrepreneur to manage the businessmore efficiently and effectively.
Better control

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