BUSINESS ENTITIES FROM ENTREPRENEUR’S VIEWPOINT

 BUSINESS ENTITIES FROM ENTREPRENEUR’S VIEWPOINT

There are various forms of entities that are used in the classification businesses. These entities will usually identify the nature of leadership that an entity may undertake and the responsibilities of the leaders towards the operations of the business. This may be particularly in regards to the accounting responsibilities in case of debt and allocation of the profits that are earned by the corporation. Some of the business entities that will be discussed include sole proprietorship, partnership, limited liability partnership, Limited Liability Company and corporation. Each of the above mentioned business entities have both advantages and disadvantages in their establishment. As a result, these benefits and limitation will be the main focus of the discussion below.
Advantages and Disadvantages of Business Entities
Sole proprietorship
A sole proprietorship is noted as a business entity where the organization is headed by a single individual. In this particular entity, the organization is presented as the simplest form of business and cannot be separated from the owner. As a result, one of its major benefits is the fact that the owner enjoys all the profits accrued. Though the business does not legally exist apart from the owner, the financial activities of the two are separate. Herein, the costs incurred by the business are separate from the costs of the owner. This enables effective book keeping of the organization (Miller, 2012). Another advantage of this business entity is where there are no significant fees incurred during its creation. In the case of a loss, the owner is able to deduct the net loss from the personal income taxes.
There are various disadvantages incurred from the setting up of such a business. The debts incurred by the organization are paid off to the full extent of personal assets by the owner. As a result, the decisions or judgments made by the sole proprietor are answerable to only him or her (Miller, 2012). Another limitation is noted where the owner is required to pay personal income tax on all profits that are earned from the business entity.
Partnership
A general partnership is another form of business entity usually demonstrated by two or more individuals making an agreement to come together and form an organization through a particular venture where their operations will lead to profit. In the formation of the entity, members of the partnership will contribute money, labor or property in the successful operation of the objective venture. As a result, each of the members will hold an equal share of the company from which each member will share the profits and loss. The formation of this entity will also not require significant fees being paid hence it is also seen as easy to establish and maintain in the long run.
However, one of it limitation is that the members of the partnerships are liable to debts incurred by the company. In this case, their personal assets may be seized to pay off the debts and liabilities of the business (Miller, 2012). Furthermore, it is required that members of the general partnership to pay off personal income taxes from the significant net profits that are accrued from a successful year of operation. This enables shared deductions from each partner of the profits rather than a single individual.
Limited Liability Partnership
In business, there is also the existence of a limited liability partnership which is similar to the general partnership. The significant difference in this type of entity is the limited liability to the debts that the business may incur. This type of partnership is seen as one that is effective in attracting investors that will help in the growth of the business. The limited partners of the firm are seen to enjoy limited amount of liability to poor decisions and judgments that may result in the poor performance (Miller, 2012). The owners of the business are usually identified as the general partners who have the role of focusing on the objective operations rather than worry about finances required. As a result, this entity enables the general partners can raise the required capital while relinquishing minimal control of the company. Another advantage is seen where limited partners can leave the business without the dissolution of the limited partnership.
There are various limitations that are experienced through the creation of this entity beginning with the costs incurred which are more expensive than the general partnership. The general partners within this entity also face the harsh consequences of personal liability for debts and liabilities that the firm may experience. The entity may also only work effectively in particular business ventures including real estate and filming industries. The high risk that faces the general partners may deter many from establishing such an entity.
Limited Liability Company
In a limited liability company, various characteristics of