Types of Ownerships

Advantages and Disadvantages

Sole Proprietorship

• A business owned and operated by one.

Advantages of Sole Proprietorship
• you’re the boss
• you keep all the profits
• start-up costs are low
• you have maximum privacy
• establishing and operating your business is
simple
• it’s easy to change your legal structure later
if circumstances change
• you can easily wind up your business.
Disadvantages of Sole
Proprietorship
• you have unlimited liability for debts as
there’s no legal distinction between private
and business assets
• your capacity to raise capital is limited
• all the responsibility for making day-to-day
business decisions is yours
• retaining high-calibre employees can be
difficult
• it can be hard to take holidays
• you’re taxed as a single person
• the life of the business is limited.
Partnership
• Ownership of two or more people
• Each partner must make a contribution to the
partnership
• Partners are jointly and severally liable for
debts on the business.
Types of Partnership
• General partnership: A partnership in which all
partners have unlimited personal liability and take
full responsibility for the management of the
business.
• Limited partnership: A partnership in which the
partners’ liability is limited to their investment.
• Joint venture: A partnership in which two
companies join to complete a specific project. The
partnership ends after a specified period of time.
• Strategic alliance: A partnership in which two
businesses work together for mutual benefit
Advantages of Partnership
Combination of new skills and ideas into a
business.
• shared responsibilities for decision making
• share profits and are therefore motivated to
work hard.
• Few legal requirements
Disadvantages of Partnership
• Not a separate legal entity
• Liable for the actions of the other partners
• Discussion between partners can slow down
decision making.
• Problems can arise if one or more partners are
lazy, inefficient or even dishonest
Corporations
• A business that is chartered by a state and
legally operates apart from its owners.
Characteristics
Advantages and Disadvantages
Cooperatives
• It is a rype of ownership that exists and
operates for the benefit of its patron members.
At the same time, since the members are also
the owners, they have a financial interest in
the success of the cooperative which sways them
toward giving it their full support and
patronage.
Advantages of a Cooperative
Organization
• A cooperative organization is owned and
controlled by members.
• It has a democratic control: one member, one
vote.
• This type of organization has a limited
liability
• Profit distribution (surplus earnings) to
members is carried on in proportion to the use
of service; surplus may be allocated in shares
or cash..
Disadvantages of a Cooperative
Organization
• A cooperative organization entails longer
decision-making process.
• It requires members to participate for success.
• Extensive record keeping is necessary in this
form of organization.
• It has less incentive, and there’s also a
possibility of development of conflict between
members.