Any new business has to decide on a type of ownership or for

Any new business has to decide on a type of ownership, or formation. What are some of the options, and their respective pros and cons?

Solution

Ans: a) Sole proprietorship: Advantage is that this form is simple in structure with no need of registration etc other formalities with the state. In matters of taxation also this gives a benefit that there will betaxation at just one level. But the con is that all the legal issues and the debts of such a business also have to to be borne individually.

b) Partnership: has the benefit that a pool of investors can lead to easy provision of funds and capital required to raise the business rather than one entity alone has to do it. The disadvantage is that there can often be conflict of interests among the partners which may even lead to the disintegration of the business.

c) Corporation: has the benefit that the sale of stocks can be used to raise funds from the market and this can even be used to transfer the ownership of the company. But the con is that there are a lot of regualtions involved in the operation of such a structure an dthere are government regulatory agencies also involved with supervise their operations.