Assignment 1 Fin 571 Foundations in Corporate Finance
Sole Proprietorship:
Advantages:
•A sole proprietorship offers simplicity in terms of paperwork and decision-making authority.
•Tax benefits since profits are reported on personal income taxes rather than corporate ones.
•A single owner has complete control over their business, allowing for quick decisions and more flexibility.
Disadvantages:
•The business is not a separate legal entity from the owner, meaning that they are personally liable for any debts or obligations incurred by the company.
•Limited access to financial resources, as all profits are subject to taxation at a personal level making it difficult to generate capital or scale operations quickly if needed.
Partnerships:
Advantages:
•Allows two or more individuals with shared goals and interests to come together to manage a jointly owned business without having to incorporate formally as a corporation.
•Greater access to funds from external sources like loans or investments due to multiple owners which can help with scaling operations faster compared with sole proprietorship models.
Disadvantages:
•Potential conflicts arising between partners about operational decisions leading potential disputes between them in some cases. •Unequal distribution of responsibilities among partners may lead one partner shouldering more responsibility than the other one leading resentment within relationship over time resulting unanticipated end business relationship itself..
Corporations: Advantages : •Legal entities separate from their owners where shareholders elect board members who manage day-to-day affairs within organization based off instructions given by shareholders themselves . •Benefits from limited liability meaning that if debts accrue during operations creditors cannot go after individual shareholders’ assets unless they were involved directly responsible in causing financial losses incurred by entity itself . •Easier access larger pools capital provided through public offerings private placements allowing them grow quickly depending upon market conditions existing at any point time.. Disadvantages : •More complex structure as compared other forms businesses requiring greater compliance adherence regulations order remain legally compliant throughout operations . •Additional costs associated maintaining such entities especially those dealing public offering placements continuously must adhere ever changing laws related securities trading do so successfully while keeping stakeholders updated changes taking place influencing performance..