1.

SOLE PROPRIETORSHIP:
A sole proprietorship is the simplest form of business
organization in which an individual operates the business as
sole owner. The advantages and disadvantages of sole
proprietorships include:

ADVANTAGE:
• Easy and inexpensive to set up and dissolve.
• Full control and decision-making authority rests with the
owner.
• All profits belong to their owners.
DISADVANTAGE
• Unlimited Personal Liability. H. The owner's personal
property is at risk.
• Financing opportunities are limited as it is based solely on
the owner's personal funds.
• Limited growth potential makes it difficult to attract top
talent.
2. PARTNERSHIP:

A partnership involves two or more people in it who agree to

share in the profits and liabilities of the company. Here are the
pros and cons:
ADVANTAGE:

• Share workloads, expertise and financial resources among

partners.
• Easier to raise funds than a sole proprietorship. Partners
can specialize in different areas, providing complementary
skills.
DISAVANTAGE:

• As with sole proprietorships, shareholders have unlimited

personal liability.
• Differences of opinion between partners can cause conflict
and hinder business operations.
• The partners are jointly and severally liable. This means
that each partner may be held responsible for the actions
of the other partner.
3. Limited Liability Company (LLC):

An LLC is a hybrid entity that combines the characteristics of a

corporation and a partnership. This provides limited liability
protection for companies while allowing flexibility in
administration and taxation. Here are the pros and cons:

ADVANTAGE:
 • Limited liability protection where the owner's personal
property is fundamentally protected.
• Flexible management system and profit distribution.
• Pass-through taxation means that profits and losses are
recorded on individual tax returns.
DISAVANTAGES:

• Forming an LLC may require more paperwork and

formalities than a sole proprietorship or partnership.
Depending on your jurisdiction, there may be annual fees
or taxes associated with maintaining an LLC.
• Limited liability exists, but it may not provide the same
protections as a corporation in certain circumstances.
Preferred form of business:
Limited Liability:
An LLC provides personal asset protection. This means that the
owner's personal assets are usually protected from business
liability. This separation protects entrepreneurs from potential
risks associated with their business.
Flexibility:
LLCs offer more flexibility in terms of management structure
and profit distribution than corporations. This flexibility allows
entrepreneurs to tailor their organization to their individual
needs and preferences.
Pass-through taxation:
LLC pass-through taxation avoids double taxation that
companies may face. Using an LLC may reduce your overall tax
burden as profits and losses carry forward to the owner's
personal tax return.