For new business it’s not always easy to decide which one to choose.

Sole
proprietorship/partnership or corporation. He needs to consider his startup financial needs, risk
and the ability to grow.

In regard to startup and operational complexity, there is nothing simpler than a sole
proprietorship. Just register your name, start doing business, report the profits and pay taxes on it
as personal income. Control over all business decisions remains in the hands of the owner. The
owner can fully transfer the sole proprietorship at any time. However, it can be difficult to
procure outside funding.

Partnerships, on the other hand, require a signed agreement to define roles and percentages of
profit. In partnership business, more capital is available and have greater borrowing capacity.
Beside these, there is a wider pool of knowledge, skills and contacts. There is limited external
regulation and it’s easy to change the legal structure later if circumstances change. There is also
a risk of disagreements and friction among partners and management.

There is a common disadvantage in sole proprietorship and in partnership business. That is sole
proprietors and partners in a partnership business have unlimited liability for all debts and
liabilities that occur while operating the business. This means partners and sole proprietors may
lose their homes, cars and other personal assets, if the businesse’s assets are insufficient to cover
the business debts.

A corporation is one of the most recognizable business structers and has a separate identity from
the owners of the company. One or more owners may participate as shareholders of a
corporation.

One of the greatest advantages of corporation is that is relatively easier to get additional capital
for it. Perhaps the most serious disadvantage of corporation is that there is double taxation. The
main reason people incorporate is to avoid personal liability.

For most entrepreneurs, one of the most important decision is whether to be a sole
proprietorship, a partnership or a corporation. A mistake in form of organization can bring long
term damage to a business. I think in this case Ashfaque will go for private limited company.
The main deterrent in choosing a corporation is the much larger amount of expenses and effort
required in setting up and maintaining this type of legal entity. If the expense is not a problem, a
corporation is quite probably the best option.
 Assignment

Name: Mashfique Faisal Fahim

ID: 17364001
Course: BUS-503
Section: 1
Course Title: Environment & Business
Instructor: Dr. Akbar Ali Khan, Professor, Brac University