Types of Business Organisations Essay Example | Topics and Well Written Essays - 1000 words

Types of Business Organisations - Essay Example Sole Proprietorship: Sole proprietorship is the simplest type of business organisation. A sole proprietor is the sole owner of all of the assets of the business and is solely liable for all the debts and obligations of the business. Unlike a corporation, the business of the sole proprietor is not considered a separate entity. Rather, it is considered an extension of the individual. The sole proprietor is personally responsible for all legal debts and obligations of the business and is entitled to all the profits of the business. Angela Schneeman (2002). John Smith is a middle-aged man who has been running his own plumbing business successfully for the last 15 years and has built a good reputation within his community. His plumbing business has improved with each year and is doing very well. John’s plumbing skills and the work he has done over the years in his neighborhood has earned him a very good reputation and helped him to build a solid client base. John is very happy with his business and plans to hand over the business to Adam, his son, as he wants him to take over this sole proprietorship business when he decides to retire. According to Angela Schneeman (2002) the sole proprietor may delegate decisions and management of the business to agents, but all authority to make decisions must come directly from the sole proprietor, who is responsible for all the business related acts of employees.... must come directly from the sole proprietor, who is responsible for all the business related acts of employees. Sole Proprietorship Advantages: Running a sole proprietorship plumbing business for the last 15 years has provided John many advantages such as being able to choose his working hours, be his own boss, not have to answer to anyone but himself and finally enjoy all the benefits and profits earned out of the plumbing business. Working within his neighborhood also gave him the opportunity to know the residents in person and also establish new friendships and build himself a good reputation, since all of the plumbing work was done by John himself. Sole Proprietorship Disadvantages: On the other hand as John started to get older he began to notice, that working as a sole trader in his business made him shoulder the entire workload by himself, and when he needed help there was no one around, and all accounts and tax related matters had to once again be prepared in detail by him. The other big concern of John was the problem of business continuity, because he was nearing the age of retiring and wanted his son Adam to take over the business but Adam showed no interest when it came to plumbing and instead wanted to become a lawyer. John was concerned as to what will happen to his business. "Plumbco Ltd" a growing private limited company was interested in setting up its operations in the neighborhood that John Smith lived in, and they heard about his reputation in the neighborhood as a plumber and of the number of years that he had served the community. With this in mind, they approached John and gave him a proposal in which they wanted to buy out his