Business entities are different in terms of the services they provide. For instance, some can offer management flexibility and protection from liabilities while other cannot. Apart from these factors considered when starting a business organization, the taxation of businesses differs. In the business world, there are two types of the establishments which include, the limited and unlimited liability institutions ( Chiappinelli, 2018) . Limited liability entities are those that provide the owners with a noteworthy degree of protection from debts, for example, general proprietorship, and the sole proprietorship. On the other hand, unlimited liability organizations restrict a business owner debt to her or his business investments, for instance, corporates.
Partnership, sole proprietorship, and corporates have various similarities and differences when it comes to the services they offer to the business. For instance, in a sole proprietorship, the owner has complete control over a business, make decisions concerning the business alone and also find the capital on their own. The main advantage is that there are few or no conflicts in the business. On the other hand, Partnership, every member has the right to give ideas on how the business should run hence most partnership companies are successful (Boyd, 2017). In addition, each member is liable for another's negligence but on the other hand with the contribution of each partner, the funding is always enough to elevate the business. Finally, in business corporates, the business owner maintains his identity and one or more owners are involved in the ownership of the business. The main difference between Corporates and the other business form is that the business owners are required to register with states where their transaction happen (Boyd, 2017). In addition, their businesses pay double tax and annually the institution has to file reports with its stakeholders.
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A sole proprietorship is a business that does not have the separate existence from its owner. In addition, the easiest and the simplest form of business that a business owner would operate. In other words, it’s a business entity which an individual owns a business, provides its start-up capital and is responsible for all the debts it incurs; however, this is not a legal establishment. Most of the Sole proprietorship business exist under their owner's name, for instance, The Bruno’s hotel. This type of business is easy to setup since it requires less capital. In addition, the only requirement needed is registering with one's name and acquiring a business license to secure one's job. Sole proprietorships business entity has various advantages. For instance, the business taxation is easy since one is taxed depending on their income. In addition, the taxation process is easy since you just have to fill a scheduled c form along with ones 1040 ( Porter & Kramer, 2017) . Moreover, you need not pay unemployment tax which is a requirement for any business. Furthermore, a business owner is entitled to making his or her own decision hence no conflicts in the business and finally one can freely mix his or her personal assets.
Even though it’s the easiest form of business, the sole proprietorship has its downfalls. For instance, the business owners are victims of unlimited liabilities such as losses, liabilities, and debts in the business. For example, if a business owner borrows money to expand his business but then loses most of his important customers and the owner is unable to pay his debts. The owner remains liable for his debt which might end up consuming his personal assets. In other instances, such as the occurrence of business accidents to the sole proprietor owners or employee. A negligence case may be filed against the business owner and personal assets such as homes and bank accounts. In addition, if the business is successful the owner has to pay his or her debt with their earned interests. Another problem faced is that sole proprietorship businesses do not retain value ( Chiappinelli, 2018) . This is because after their owner dies or reject them they collapse since there is no one to manage them. Most of these businesses are managed by their owners using their own rules hence taking over such a business may be difficult hence most of them are closed. Moreover, even though the business owner does not get to pay unemployment taxes, it’s a disadvantage since they do not get to enjoy the benefit of unemployment of your business if the business fails. Finally, owners cannot be able to create capital by just selling a business interest. Often most of the big business begin as the sole proprietorship and then elevate as people learn better business ideas.
Partnership form of business is one of the popular business ventures since they are easy to establish and give a taxation pass through ( Boyd, Henning, Reyna, Wang, Welch & Hoffman, 2017) . In other words, the partnership is not taxed. However, the business benefits pass through the individuals. Most of this business success since each partner's complementary skills are involved. The business involves the partnership of two or more than people with common ideas that they want to implement. In summary, the main advantages of partnership entity are the capital, profit gained and decision making involves all the partners. These types are flexible in terms of management since responsibilities are shared among the involved parties and finally, they have fewer restrictions.
Although this is the best way to start up a business, there are several challenges faced in this type of business entity. First, there is maximum taxation since some of the employees' benefits cannot be deducted the income earned by the business partners. In addition, each of the involved parties has to pay tax individual just like in sole proprietorship. In fact, they are supposed to register as self-employed business people unlike incorporates. Secondly, disagreements maybe face when it comes to decision-making. When it comes to businesses each person has different ideas on how to manage the business in the best way which may not only the business productivity but the relationships present. Thirdly, partnership establishments are subjects to unlimited liabilities. As a result, each of the members shares the financial risks and the liability of the entity which put some members. In other instance, other are made liable for their partner's negligence and mistakes (Chiappinelli, 2018). Finally, when it comes to profit-sharing, it may be inconsistent since some of the partners put less effort and share in the blooming of the business but still reap for the reward.
A corporation is a legal establishment that is distinct and separate from its founders. The main advantage of corporations is that they get to enjoy all the business responsibilities and rights such as own assets, hire employees, borrow and enter into contracts among others. The most significant aspect of this business entity is the limitation of liability which means that the shareholders get to participate in the dividends and profits as well ( Schwartz, 2017) . Corporate are commonly formed when different shareholders holding common stocks come together to accomplish the same objective. Corporate is regulated by corporate laws. Some of the advantages of this entities are, offering significant protection of limited liabilities to the shareholders since they are not responsible for the liabilities and debts individually. As a result, shareholders assets cannot be used to pay the debts incurred by the company. Moreover, corporates earn tax advantages on the employees such as health insurance paid on the employees' behalf ( Porter & Kramer, 2017) . Furthermore, corporates retain value since they are not dependent on their owners. In addition, it is easy to raise the capital required just by the sale of stocks in sole ownership. Finally, corporations help in establishing credibility.
Corporates are always successful depending on their management. However, the various challenges now and then. For instance, all corporate face double taxation. This is because after the establishment pays its tax at the higher level and the profit paid to the involved shareholders, the individual is taxed on their personal level depending on their income. Secondly, the corporate formalities such as filing of the corporates reports annually must be followed among other regularities. Another challenge faced by corporate is competition and increased selection. Furthermore, the ongoing and formation expenses are high. Most states impose taxes on corporations since they are required to file state legal documents. This is unlike for the partnership and sole proprietorship entities hence making corporate expensive to establish and run as well. Finally, most public corporate face proxy contests (Schwartz, 2017). A proxy contest is a struggle for the public corporation ownership and control. This involved an election between the management and non-management body into the corporate board so that whoever wins gains control over the best. Most of these events are takeover events. A proxy contest may lead to disputes in the company and among shareholders as well.
In conclusion, there two types of business organization depending on the services they offer to a business such as taxation, flexibility in management and control of the business and the regulations to be followed. The two types are limited and unlimited liability businesses. In addition, under these two types of business are various business forms such as sole proprietorship, partnership, and corporates. Each of the given entities has its benefits and challenges as well (Porter & Kramer, 2017). However just like all the businesses each of them faces management issues and competition as well. Finally, when starting up a business it is wise to consider some of its benefits and challenges as well as the services it offers.
References
Chiappinelli, E. A. (2018). Cases and materials on business entities . Wolters Kluwer Law & Business.
Boyd, B., Henning, N., Reyna, E., Wang, D., Welch, M., & Hoffman, A. J. (2017). Hybrid organizations: New business models for environmental leadership . Routledge.
Porter, M. E., & Kramer, M. R. (2017). Creating shared value. In Managing Sustainable Business (pp. 327-350). Springer, Dordrecht.
Schwartz, M. S. (2017). Corporate social responsibility . Routledge.
