Sample Essay on Form of Business Organization


Choosing a form of business is very important to any business because it could determine the form of liability and other management issues. Some businesses give the owner much control but in others the decisions of other partners greatly count. Tax charged on businesses is also determined by the type. Some businesses attract less tax than others or often receive some exemptions however the sole partnership is fully exempted from tax. Some business types make decision making easy which is normally preferred by those engaging in small businesses. In choosing a type of business, the available capital and the ease of registration should be considered.

With $50,000 for a bakery business, I would form a sole proprietorship. In sole proprietorship a small amount of capital may be used to establish the business because there are no restrictions. It is very cheap or at no cost at all to form a sole partnership. This kind of business is owned by one person and therefore all decisions and decisions of the business depend on the one individual establishing it. In this kind of business decisions are fast to make because it is run by the owner. This is an advantage because it greatly saves on time that would have involved decision making by many people like in a company or partnership. The owner is solely responsible for any incidentals to the business. Profits in a sole partnership are also reserved to the owner unlike the partnership and the company where profits are shared among partners. Sole proprietors are exempted from paying tax unlike the limited liability companies; this therefore means that a sole proprietorship enjoys more profits compared to the company type of business

With the amount involved, sole proprietorship is ideal because of the ease with which it can be formed. It costs a lot much less to establish a sole proprietorship than a company or a partnership. Sole proprietorship is very common in the United States because of the little impediments to its formation. When forming a limited liability company, several formalities are involved before it is registered. The process is tedious and expensive.

It is also important to note that there are no different entities to the sole proprietorship and therefore, debts and liabilities directly accrue to its owner. Any default will mean the individual is sued unlike in a limited liability company. Sole proprietors are required to pay for debts with both the business and personal individual assets. A sole proprietorship business is a risky kind of business and whereas there are some advantages to it, there are several disadvantages. The sole proprietor has discretion to hire employees however the employees report to him individually. Any inability to pay the employees will make the owner of the business directly responsible. Whereas the decision making is fast in a sole proprietorship, the decisions made may not be as sound as they would be in a partnership or a company arrangement. The sole proprietorship has no perpetual existence. This means that if the owner died, the business is also dead unlike the partnership where the other owner inherits the business. The lack of continuity may be one of the major disadvantages.

I would therefore say with a capital fifty thousand dollars and the time required to establish a business, sole proprietorship is the best suited (Mallor, 2016).




Mallor, J. P. (2016). Business law: The ethical, global, and e-commerce environment.