What Are The Strengths And Weaknesses Of Sole Proprietorship

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The strength of the sole proprietorship are the ease of formation, tax preference, employment, decision-making and ownership. Setting up a single proprietorship is much simpler and much cheaper than setting up a formal company. Some states allow in the absence of suitable for most companies under the condition of double taxation standard set up wholly owned enterprises. A sole proprietorship can be named after its owner, or can use a dummy name to enhance its marketing. Second, tax incentives. Owners of a single proprietorship do not need to submit separate business tax reports. Instead, they will list their business information and data on their tax returns. This can save money on accounting and tax returns. The business would be taxed at…show more content…
Liability is the weaknesses of the proprietorship .The business owner will be held directly responsible for any losses, debts, or violations coming from the business. For example, if an enterprise has to repay its debt, it will be satisfied from the owner's own personal fund. This is drastically different from corporations, wherein the members enjoy limited liability (i.e., they cannot be held liable for losses or violations). Another weakness of the proprietorship is taxes. Although the sole proprietorship enterprise has many tax advantages, the main drawback is that the owner must pay individual income tax. In addition, some tax breaks may not be deductible, such as employees' health insurance premiums. Lack of "continuity" means that when the owner dies or loses capacity, the enterprise will not continue to operate because they are regarded as the same person. Upon the owner’s death, the business is liquidated and becomes part of the owner’s personal estate, to be distributed to beneficiaries. This could impose a heavy tax burden on beneficiaries because of inheritance and inheritance taxes. This can result in heavy tax consequences on beneficiaries due to inheritance taxes and estate taxes. Then there is the difficulty of raising money. Since the initial capital is usually provided by the owner, it is difficult to generate…show more content…
The weaknesses for partnership are disagreements. One of the most obvious disadvantages of partnership is the danger of disagreements between the partners. Obviously, people have different ideas about how to run a business, what they should do, and what is in the best interest of the enterprise. This could lead to disagreements and disputes, which would not only damage the business, but also harm the relationship. This is why it is always advisable to draft a deed of partnership between the formation period to ensure that everyone is aware of what procedures will be in place in case of disagreement and what will happen if the partnership is dissolved. The weaknesses for partnership are agreement. Because partnerships work together, it is necessary to have all partners agree to what is being done. This means that in some cases there is less freedom to manage the business. Especially compared to sole- traders. However, there is still more flexibility than with limited companies where the directors must bow to the will of the members (shareholders). Next, the weaknesses for partnership is liability. Ordinary Partnerships are subject to unlimited liability, which means that each of the partners shares the liability and financial risks of the business. This is impossible for some people. This can be dealt with by setting up a limited liability partnership, which benefits from

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