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By:Jordan Bowen
Minimal legal costs to forming a sole proprietorship Few formal business
No corporate tax payments
Sale or transfer can take place at the discretion of the sole proprietor
A sole proprietor has complete control and decision-making power over the

The sole proprietor of the business can be held personally liable for the debts
and obligations of the business. Additionally, this risk extends to any liabilities
incurred as a result of acts committed by employees of the company.
All responsibilities and business decisions fall on the shoulders of the sole
Investors won't usually invest in sole proprietorships.


two heads (or more) are better than one
your business is easy to establish and start-up costs are low
more capital is available for the business
youll have greater borrowing capacity
high-calibre employees can be made partners
there is opportunity for income splitting, an advantage of particular
importance due to resultant tax savings
partners business affairs are private
there is limited external regulation
its easy to change your legal structure later if circumstances change.


the liability of the partners for the debts of the business is unlimited
each partner is jointly and severally liable for the partnerships debts; that is,
each partner is liable for their share of the partnership debts as well as being
liable for all the debts
there is a risk of disagreements and friction among partners and
each partner is an agent of the partnership and is liable for actions by other
if partners join or leave, you will probably have to value all the partnership
assets and this can be costly.

The liability of the owners towards the creditors is limited to their investment in
the company. This means that in case of liquidation of the company, if the
company's assets are insufficient to meet the liability, nothing is required to
be contributed by the owners. Only the owners' contribution is at stake rather
than their personal assets.
The corporation is considered a legal person with perpetual existence. It
exists until it is liquidated and death or change in ownership has no effect on
the corporation.
Additional capital can be raised easily through stock markets, etc.
The ownership is represented by the number of share certificates held by a
person, and this makes the transfer of ownership very easy.

Establishing a corporation is a complex process and requires registration with the
central regulatory authority and listing on a stock exchange which required
fulfillment of certain requirements related to the amount of capital, number of
directors, etc.
Normally the corporations have a large number of shareholders; they delegate the
governance function to a body of persons called board of directors. The board of
directors hires management to look after the day to day affairs of the corporation.
The management is an agent and the owners are principal. It is quite possible that
the management may act to further their own interests rather than the interest of
the owners of the corporation. When this happens it is called an agency problem.
In case of corporations there is double taxation. First of all the corporate income is
taxed at a flat rate and then the dividends paid to the shareholders is taxed.

There is a higher likelihood of success since a proven business formula is in place. The
products, services, and business operations have already been established.
Bankers usually look at successful franchise chains as having a lower risk of
repayment default and are more likely to loan money based on that premise.
The corporate image and brand awareness is already recognized. Consumers are
generally more comfortable purchasing items they are familiar with and working
with companies they know and trust.
Franchise companies usually provide extensive training and support to their
franchisees in effort to help them succeed.
Many times products and services are advertised at a local and national level by
the main franchise companies. This practice helps boost sales for all franchisees, but
individual franchisees don't absorb the cost.
Franchises can be costly to implement. Also, many franchises charge
ongoing royalties cutting into the profits of franchisees.
Franchisors usually require franchisees to follow their operations manual to a
tee in order to ensure consistency. This limits any creativity on the part of the
Franchisees must be very good at following directions in order to maintain
the image and level of service already established. If the franchisee is not
capable of running a quality business or does not have proper funding, this
could curtail success