Legal Forms of Business
Advantages and Disadvantages
Sole Proprietorship Advantages
z Low start-up costs z Greatest freedom from regulation z Owner in direct control z Minimal working capital requirements z Tax advantage to small owner z All profits to owner
Sole ProprietorshipDisadvantages
z Unlimited liability z Lack of continuity z Difficulty in raising capital
Partnership - Advantages
z Ease of formation z Low start-up costs z Added sources of venture capital z Broader management base z Possible tax advantage z Limited regulation
Partnership-Disadvantages
z z z z Unlimited liability Lack of continuity Divided authority Difficulty in raising additional capital z Difficulty in finding suitable partners
Corporation–Advantages
z Limited liability z Specialized management z Transferable ownership z Continuous existence z Legal entity z Possible tax advantages z Ease of raising capital
Corporation–Disadvantages
z Close regulation z Most expensive form to organize z Charter restrictions z Extensive recordkeeping z Double taxation
Franchise–Advantages
z Smaller-than-usual capital investment z Less working capital than normally required z Prior public acceptance of product or service z Management assistance z Better-than-average profit margins
Franchise–Disadvantages
z Possible high franchisor fees, supplies, and charges z Some loss of independence z Possible difficulties in cancelling contracts