Importance of sole Proprietorship, Corporation and Partnership towards Economic Progress

Importance of sole Proprietorship, Corporation and Partnership towards Economic Progress
Importance of sole Proprietorship, Corporation and Partnership towards Economic Progress

Choosing the appropriate business structure is one of the most important decisions in the life of any new company and is governed by a range of factors including taxation issues, corporate governance, and liability.

 

Partnerships are complicated, necessitating ongoing communication and trust between all partners. Corporations provide a structure that removes many day-to-day operational responsibilities from owners but have complex internal mechanics that necessitate constant care and feeding to achieve full benefit from this form of organization.

 

A sole proprietorship is one man band or woman against the world with considerable freedom but few resources for growth or security. Which one is the most suitable for a company?

 

 

PARTNERSHIPS

Definition: A partnership is an association of two or more persons for any purpose. It can be either general or limited. In a general partnership, every partner is an agent of the other partners and liable for all their obligations.

 

Both general and limited partnerships are common legal forms that can be used as alternative business structures, providing protection against many risks such as liability and taxes. A limited liability company (LLC) is a business entity in which owners have limited liabilities similar to shareholders of a corporation but with fewer formalities. An S corporation is a business entity that elects to be treated as a corporation for federal tax purposes.

 

 

A partnership is an association of two or more persons which has legal personality as in any business, it is necessary that there is a partner who takes the lead. A partnership can be established either between persons with prior association or between strangers.

 

In case of joint family, all its members become partners in the family business by simple usage of expression like “dukhadayan karte ho” (We are running the enterprise). However, there has to be a minimum two partners to form the limited partnership.

 

A ‘partnership’ must be distinguished from a ‘joint venture’. A partnership is created by the agreement between two or more persons and a joint venture could be either a partnership or a business owned by an individual.

 

 

While a joint venture is normally created for achieving single specific objective, a partnership is meant to be long-term arrangement. A partner contributes money and skill whereas in a joint venture, each partner contributes labour and/or property.

 

Partnership results in co-ownership of property in which all partners have an equal interest. Each partner has management powers in the company but he may delegate his powers to other partners or employees. A general partner can bind the firm on any contract even without the consent of other partners but not vice versa for the limited partner.

 

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