Major Forms of Business

Introduction 

Entrepreneurship is one of the sectors that are experiencing rapid positive growth across the globe. The increasing rate of youth unemployment, globalization, and easy access to information are some of the main factors that are facilitating the growth of entrepreneurship globally, including the USA. However, before starting any business, it is important for an entrepreneur to choose the best and the most appropriate form of business in order to enhance his or her chances of success. The major forms of business include sole proprietorship, partnership, corporation, limited partnership, limited liability company, and limited liability partnership ( Štefan & Richard, 2014) . Therefore, I would like to focus on sole proprietorship due to its numerous advantages, especially for new and small businesses. 

Description of the Business that I would Form 

I would form a Family Owned Business that mainly focuses on the selling of performance automotive parts for racing. The demand for performance automotive is surging across the world, especially in developed countries like the USA. For instance, the demand for performance cars in the USA has increased by about 70% since 2009, and the trend is expected to continue in the future (Paukert, 2015). The increasing demand is mainly caused by the surging number of wealthy people in society due to rapid economic growth and development. Consequently, the demand for performance automotive parts for racing is expected to continue increasing, resulting in a business opportunity for many people. Nonetheless, a significant number of people are not likely to venture in the business due to its relatively high initial capital and the need for some technical skills to operate the entity (Paukert, 2015). Thus, I prefer a business that would sell performance automotive parts for racing. 

The business would mainly be based in New York, even though it would expand to other parts f the USA such as Maine and Connecticut. Although I would be the person to own the business, I would work with my family, especially my five children, to manage the enterprise. The primary target market would be middle and high-income earners, including people who value luxurious cars. At the same time, the target market would include people who engage in automotive racing because they are the people who are mostly to use such cars or automobiles. I firmly believe that the business would succeed due to the surging demand and due to the quality products and services that I would offer to customers. 

The Format I would Use to Create the Company 

I would use a sole proprietorship format to create the company or company. Sole proprietorship refers to a form of business that is mainly owned by an individual where the owner is regarded as the business. In a sole proprietorship, it is the owner who determines the creation and termination of the business ( Clarkson et al., 2010) . Also, it is the owner who largely plays the management role, even though he or she can be assisted by family members or friends. Thus, I would have the sole mandate to manage the business, increasing the chances of success. Many start-ups business people prefer a sole proprietorship because it does not require a lot of organizational formalities while at the same time, it is not subject to many laws and regulations ( Crusto, 2008) . I believe that sole proprietorship is the best format for my business or company. 

Advantages of Sole Proprietorship Compared to Other Forms of Business 

The simple start-up is one of the major advantages of a sole proprietorship, as it does not involve a lot of extensive registration paperwork that can be expensive and time-consuming. For instance, a person can just use his own name to register the business while it does not require compliance with many rules and regulations ( Clarkson et al., 2010) . On the contrary, other forms of business require a lot of paperwork to register. For instance, in the case of a partnership, partners are required to make a formal agreement before they start operating the business. Also, to form a corporation, entrepreneurs are forced to comply with many laws and statutes, including the state corporation laws ( Crusto, 2008) . Therefore, it is easier to start a sole proprietorship business than any other form or format of a firm. 

Besides, sole proprietor enjoys complete control of the business ( Clarkson et al., 2010) . In many cases, it is the sole proprietor who is the manager and employee of the firm, making it easier to make critical decisions. Businesses are often required to make quick and timely decisions, which are only possible when a person is operating sole proprietorship (Tohidi & Jabbari, 2012). However, other forms of businesses like partnership, corporation, and company involve many people at the management level. In partnership, for instance, every partner has equal right on any issue that is raised, which may end up the decision-making process. Nonetheless, unlike other forms of business, the fact that the sole proprietorship is management the owner makes it lacks the diversity of thought and idea that is essential to the success of a business. 

Also, operating a sole proprietorship business is advantageous because it is not subjected to a lot of taxes. For instance, the owner is only required to pay personal taxes and maybe annual fees, which is lesser compared to other forms of businesses. Conversely, in the case of a partnership, every partner is required to pay pro-rata share of income tax on any profit made by a business. Corporations and companies are also subjected to double taxation ( Clarkson et al., 2010) . Hence, the operating cost for the sole proprietorship is lower than any other form of business. 

Disadvantages of Sole Proprietorship Compared to Other Forms of Business 

The major disadvantage of a sole proprietorship business is that it bears unlimited liability, which may increase the financial burden of the owner significantly. The owner bears the burden of loss again, leading to an increased risk of failure or bankruptcy. Even though the partnership may also have unlimited liability, the loss is shared among partners, resulting in a substantial reduction in the financial burden ( Štefan & Richard, 2014) . Conversely, corporations and companies have limited liability. Thus, a sole proprietorship is associated with a lot of financial risks and burden compared to any other form o business. 

The difficulty of raising the initial capital is another disadvantage that is linked to a sole proprietorship. As a result, it is not easy to starts a sole proprietorship that requires much initial capital. At the same, sole proprietors may find it challenging to get capital to enhance business growth and to gain a competitive advantage in the market ( Clarkson et al., 2010) . Nevertheless, capital is not one of the major issues in other forms of business such as partnership, corporations, and companies due to a large number of partners and shareholders ( Štefan & Richard, 2014) . Partnership, corporation, and companies can easily get funds from shareholders, leading to rapid business growth and success. 

Conclusion 

Entrepreneurs should choose the most appropriate form of business to enhance success and sustainability. A sole proprietorship is most appropriate for a start-up business, and it requires a person with relevant management skills. The success of my sole proprietorship business would mainly be influenced by my financial resources and managerial knowledge and skills. Business owners play a significant role in the success of their enterprises. 

References 

Clarkson, K. W., Jentz, G. A., Cross, F. B., & Miller, R. L. (2010). Business Law: Text and Cases - Legal, Ethical, Global, and Corporate Environment (14 th ed.). Cengage Learning. 

Crusto, M. F. (2008). Unconscious Classism: Entity Equality for Sole Proprietors. Journal of Constitutional Law, 11 (2) , 215-231. 

Paukert, C. (2015, May 31). Automakers race to meet sizzling demand for performance vehicles. Automotive News . Retrieved from https://www.autonews.com/article/20150531/OEM/306019983/automakers-race-to-meet- sizzling-demand-for-performance-vehicles 

Štefan, S., & Richard, B. (2014). Analysis of business models. Journal of Competitiveness , 6 (4), 19-40. 

Tohidi, H., & Jabbari, M. M. (2012). Decision role in management to increase the effectiveness of an organization. Procedia-Social and Behavioral Sciences , 31 (3 ) , 825-828.