The Sole Proprietorship And Partnership Forms Business Essay

When I doing this assignment I know that Business environment is that which surrounds a business. It affects a business. It is dynamic in the sense it keeps changing. Since it is composed of many factors, it is important for a company to study and monitor its environment carefully. This is so that the business does not go wrong in its planning process for its current and future plans. The changes in the environment may be good or bad for a particular business. They can affect the business in a positive or a negative way. It becomes essential to monitor the environment, especially the external, uncontrollable part of the environment. Since there are innumerable components that make up the total environment, a careful understanding of each and the implications of the changes of each factor need to be done. This facilitates the strategic planning process. Just as a human being take decisions based on his or his surrounding environment, example: parent, siblings, peer group, teachers, role models, health, attitude, socio-economic status.

Other than that, when I doing this assignment I understand that Sole Proprietorship and Partnership. I also know that A business owned by a single owner is referred to as a sole proprietorship. The owner of a sole proprietorship is called a sole proprietor. A sole proprietor may obtain loans from creditors to help finance the firm’s operations, but these loans do not represent ownership. The sole proprietor is obligated to cover any payments resulting from the loans but does not need to share the business profits with creditors. Typical examples of sole proprietorships include a local restaurant, a local construction firm, a barber shop, a laundry service, and a local clothing store. About 70 percent of all firms in the United States are sole proprietorship. But because these firms are relatively small, they generate less than 10 percent of all business revenue. The earnings generated by a sole proprietorship are considered to be personal income received by the proprietor and are subject to personal income taxes collected by the Internal Revenue Service.

Introduction of Business

When I study this subject, I understand the importance of business. I know that, business can be defined as a person, partnership, or cooperation that seeks to provide goods and services to others at a profit. Besides that, this course can have a major impact on your career direction and future success regardless of whether you major in business, the sciences, or the liberal arts. Whatever you major may be, you are likely to end up pursuing a career in a business setting. For example, if you major in science, you may work for a biotechnology firm and can benefit from an understanding of business concepts such as managing an organization, working with employees, and managing employees. If you select journalism as a major, you may work for a media or publishing firm and, therefore, can benefit from an understanding of business concepts such as providing a product desired by consumers. Business concepts such as creating ideas, leadership, teamwork, and quality control are relevant to almost everyone, no matter what career is chosen. An Introduction to Business course provides the foundation of business knowledge that can enable you to utilize your talents in the business world. It also provides you with an overview of many different business worlds. It also provides you with an overview of many different business topics, allowing you to determine the specific field of business.

Introduction of Business Environment

Business environment is that which surrounds a business. It affects a business. It is dynamic in the sense it keeps changing. Since it is composed of many factors, it is important for a company to study and monitor its environment carefully. This is so that the business does not go wrong in its planning process for its current and future plans. The changes in the environment may be good or bad for a particular business. They can affect the business in a positive or a negative way. It becomes essential to monitor the environment, especially the external, uncontrollable part of the environment. Since there are innumerable components that make up the total environment, a careful understanding of each and the implications of the changes of each factor need to be done. This facilitates the strategic planning process. Just as a human being take decisions based on his or his surrounding environment, example: parent, siblings, peer group, teachers, role models, health, attitude, socio-economic status.

1.2 The Economic and Legal Environment

People are willing to start new businesses if they believe that the risk of losing their money isn’t too great. Part of that risk involves the economic system and how government works with or against businesses. Government can do a lot to lessen the risk of starting businesses and thus increase entrepreneurship and wealth. For example, a government can keep taxes and regulations to a minimum. Another way for government to actively promote entrepreneurship is to allow private ownership of businesses. In some countries, the government owns most businesses, and there’s little incentive for people to work hard or create profit. All around the world today, however, governments are selling those businesses to private individual to create more wealth. One of the best things the governments of developing countries can do is to minimize interference with the free exchange of goods and services.

1.3 The Technological Environment

Technological factors sometimes pose serious problems. A firm that unable to cope with technological changes may not be survived. Further, the differing technological environment of different markets or countries may be called for product modifications. Besides that, Technology also is the most important elements of the macro environment. Furthermore Technology is the human being innovation and it literally wonder Technology helps to human being go to the moon, travelling the spaceships, other side of the globe with few hours. Advances in the technologies have facilitated product improvements and introduction of new products and have considerably improved the marketability of the products. The fast changes in technologies also create problems for enterprises as that render.

Plants and product obsolete. Today adopt changers in technology to achieve successful in business and industry. Internet and telecom system also is the important part of technological development in the world. These things today changed whole world. It changes people and business operation. It leads to many new business opportunities apart from the many existing systems. Technological environment characteristics are outlined:

The find of technological change

Opportunities are arising out of technological developments.

Risk and uncertain is the major feature of the technological developments.

Research and development role to country

Technology and business activities are to be highly considerable, interrelated and interdependent. Technology output/fruit’s available to society through business activities in this way improve the quality of life in the society. Therefore, technology nurtured by business.

1.4 The Social Environment

Demography is the statistical study of the human population with regard to its size, density, and other characteristics such as age, race, gender, and income. The particularly interested in the demographic trends that most affect business and career choices. Managing Diversity has come to mean much more than recruiting and keeping minorities and women. Many more groups are now included in diversity efforts. For example, the list of 26 diversity groups identified by Federated Department Stores includes seniors, the disable, homosexuals, atheists, extroverts, introverts, married people, singles, and the devout.

1.5 The Global Environment

The global environment may affect all firms directly or indirectly. Some firm rely on foreign countries for some of their supplies or sell their products in various countries. They may even establish subsidiaries in foreign countries where they can products and sell to them. Even if a firm is not planning to sell its products in foreign countries, it must be aware of the global environment because it may face foreign competition when it sells its product locally. Furthermore, global economic conditions can affect local economic conditions. It economic condition weaken in foreign countries, the foreign demand for U.S. products will decrease. Consequently, sales by U.S. firms will decrease, and this may result in some layoffs. The general income level in the United state will decline, and U.S. consumers will have less money to spend. The demand for all products will decline, even those that are sold only in the United States. Thus, even firms that have no international business can be affected by the global environment.

1.5.1 How Global Changes Affect You

As businesses expand to serve global markets, new jobs will be created in both manufacturing and service industries. U.S. exports are expected to continue to increase under new trade agreements that will lead to expansion of the job market both in the United States and globally. Global trade also means global competition. The students who will prosper are those who are prepared for the markets of tomorrow. That means that you must prepare yourself now to compete in a rapidly changing worldwide environment.

Conclusion

Introduction of Ownerships

When entrepreneurs establish a business, they must decide on the form of business ownership. There are three basic forms of business ownership: sole proprietorship, partnership, and corporation. The form that is chosen can affect the profitability, risk, and value of the firm. The business ownership decision determines how the earnings of a business are distributed among the owners of the business, the degree of liability of each owner, the degree of control that each owner has in running the business, the potential return of the business, and the risk of the business. These types of decisions are necessary for all business.

Sole Proprietorship

A business owned by a single owner is referred to as a sole proprietorship. The owner of a sole proprietorship is called a sole proprietor. A sole proprietor may obtain loans from creditors to help finance the firm’s operations, but these loans do not represent ownership. The sole proprietor is obligated to cover any payments resulting from the loans but does not need to share the business profits with creditors. Typical examples of sole proprietorships include a local restaurant, a local construction firm, a barber shop, a laundry service, and a local clothing store. About 70 percent of all firms in the United States are sole proprietorship. But because these firms are relatively small, they generate less than 10 percent of all business revenue. The earnings generated by a sole proprietorship are considered to be personal income received by the proprietor and are subject to personal income taxes collected by the Internal Revenue Service.

Characteristics of Sole Proprietors

Sole proprietors must be willing to accept full responsibility for the firm’s performance. The pressure of this responsibility can be must greater than any employee’s responsibility. Besides of this, Sole proprietors must also be willing to work flexible hours. They are on call at all times and may even have to substitute for a sick employee. Other than that, their responsibility for the success of the business encourages them to continually monitor business operations. They must exhibit strong leadership skills, be well organized, and communicate skill well with employees.

Many successful sole proprietors had precious work experience in the market in which they are competing, perhaps as an employee in a competitor’s firm. For example, restaurant managers commonly establish their own restaurant. Experience is critical to understanding the competition and the behavior of customers in a particular market.

Advantages of a Sole Proprietorship

Easy Organization

Establishing a sole proprietorship is relatively easy. The legal requirements are minimal. A sole proprietorship need not establish a separate legal entity. The owner must register the firm with the state, which can normally be done by mail. The owner may also need to apply for an occupational license to conduct a particular type of business. The specific license requirements vary with the state and even the city where the business is located.

Complete control

Having only one owner with complete control of the firm eliminates the chance of conflicts during the decision on the menu, the prices, and the salaries paid to employees.

Lower Taxes

Because the earnings in a proprietorship are considered to be personal income, they may be subject to lower taxes than those imposed on some other forms of business ownership.

Total Decision-Making Authority

Because the sole proprietor is in total control of the operations, he or she can respond quickly to changes, which is an asset in a rapidly shifting market. The freedom to set the company’s course of action is a major motivational force. For those who thrive on the enjoyment of seeking new proprietors thrive on the feeling of control they have over their personal financial futures and the recognition they earn as the owners of their business.

Disadvantages of a Sole Proprietorship

The Sole Proprietor Incurs All Losses

Just as sole proprietors do not have to share the profits, they are unable to share any losses that the firm incurs. For example, assume you invest $10,000 of your funds in a lawn service and borrow an additional $8,000 that you invest in the business. Unfortunately, the revenue is barely sufficient to pay salaries to your employees, and you terminate the firm. You have not only lost all of your $10,000 investment in the firm but also are liable for $8,000 that you borrowed. Since you are the sole proprietor, no other owners are available to help cover the losses.

Unlimited Liability

A sole proprietor is subject to unlimited liability, which means there is no limit on the debts for which the owner is liable. If a sole proprietors is sued, the sole proprietor is personally liable for an judgment against that firm.

Limited Skills

A sole proprietor has limited skills and may be unable to control all parts of the business. For example, a sole proprietor may have difficulty running a large medical practice because different types of expertise may be needed.

Limited Funds

A sole proprietor may have limited funds available to invest in the firm. Thus, sole proprietors have difficulty engaging in airplane manufacturing, shipbuilding, computer manufacturing, and other business that require substantial funds. Sole proprietors have limited funds to support the firm’s expansion or to absorb temporary losses. A poorly performing firm may improve if given sufficient time. But if this firm cannot obtain additional funds to make up for its losses, it may not be able to continue in business long enough to recover.

Partnership

A business that is co-owned by two people or more than two people is referred to as a partnership. The co-owners of the business are called partners. The co-owners must register the partnership with the state and may need to apply for an occupation license. About 10 percent of all firms are partnerships. Besides of this, in a general partnership, all partners have unlimited liability. That is, the partners are personally liable for all obligations of the firm. Conversely, in a limited partnership, the firm has some limited partners, or partners whose liability is limited to the cash or property they contributed to the partnerships. Limited partners are only investors in the partnership and do not participate in its management, but because they have invested in the business, they share its profits or losses. A limited partnership has one or more general partners, or partners who manage the business, receive a salary, share the profits or losses of the business, and have unlimited liability. The earnings distributed to each partners represent personal income and are subject to personal income taxes collect by the IRS.

Disadvantages of Partnerships

Lack of Continuity

If one partner dies, complications arise. Partnership interest is often nontransferable through inheritance because the remaining partner may not want to be in a partnership with the person who inherits the deceased partner’s interest. Partners can make provisions in the partnership agreement to avoid dissolution due to death if all parties agree to accept as partners those who inherit the deceased’s interest.

Control is shared

The decision making in a partnership must be shared. If the partners disagree about how the business should be run, business and personal relationships may be destroyed. Some owners of firms do not have the skills to manage a business.

Unlimited Liability

General partners in a partnership are subject to unlimited liability, just like sole proprietors.

Profits Are Shared

Any profits that the partnership generates must be shared among all partners. The more partners there are, the smaller the amount of a given level of profits that will be distributed to any individual partner.

Conclusion

Of my opinion I would like to choose Sole Proprietors, because it is better than Partnerships. Besides that, it is lower taxes because the earnings in a proprietorship are considered to be personal incomes, they may be subject to lower taxes than those imposed on some other forms of business ownership. Other than that, Sole Proprietors make us easy and quickly do decision and making authority. Because the sole proprietor is in total control of the operations, he or she can respond quickly to changes, which is an asset in a rapidly shifting market. The freedom to set the company’s course of action is a major motivational force. For those who thrive on the enjoyment of seeking new proprietors thrive on the feeling of control they have over their personal financial futures and the recognition they earn as the owners of their business. Other than that, Sole proprietors is much more better than Partnerships because of Partnerships much more disadvantages then Sole Proprietors. If one partner dies, complications arise. Partnership interest is often nontransferable through inheritance because the remaining partner may not want to be in a partnership with the person who inherits the deceased partner’s interest. Partners can make provisions in the partnership agreement to avoid dissolution due to death if all parties agree to accept as partners those who inherit the deceased’s interest.