Quiz 23: Sole Proprietorships, Partnerships, and Limited Liability Companies
The Uniform Partnership Act (UPA) provides that upon the death of a partner their shares are transferred to the remaining partners through specific partnership property rationale. Also, the UPA sets forth that partners can only become a partner with the unanimous consent of all partners. The partnership is required to account to the estate for the value of the deceased partner's interest. It is well settled that upon the death of a partner a remaining spouse does not receive a share of the ongoing partnerships assets. Therefore, D's widow would not be eligible to get the firm's assets or become a partner with E. However, if it is consented by E or if the partnership agreement has a similar condition mentioned in it, she may become eligible for the same.
Below mentioned are the advantages of sole proprietorship: • Corporate tax is not applicable in case of sole proprietorship. • Business requirements are very formal. • Very minimal legal cost is involved in forming sole proprietorship. • Sole proprietor has the discretion over sale and transfer of the business. • Sole proprietor has decision making power and complete control over the business. Below mentioned are the disadvantages of sole proprietorship: • Sole proprietor is personally liable for debts and business obligations. • Risk off wrongdoing of employees must also be bared by the sole proprietor. • Investors generally do not invest in sole proprietorship. • Sole proprietors have to finance their business through personal assets and loans.
Sole entrepreneurship: Any person who establishes a business without creating separating business organizations is known as sole entrepreneurship. It is one of the simplest forms of business organizations. The sole person is held liable for entire obligations or debts which are incurred by the company. Advantages of sole proprietorship: 1. Easy formation: Sole proprietorship is very easy to establish as compared to other business form as less legal formalities are required. There is no need to file documents to government in order to start an entrepreneur. Thus such less cumbersome legal formalities made the establishment of sole entrepreneurship easy. 2. less expensive and profitable: The major advantage of sole proprietorship is that it is very easy and less expensive to establish as compared to other form of business. It is profitable as the entire profit earned belongs to the owner. 3. Flexible: This form of proprietorship is provides most flexibility than any other form of business as sole proprietor has freedom to take any decision regarding business. Disadvantages of sole proprietorship: 1. Unlimited liability: The major disadvantage of sole proprietorship is unlimited liability which means that sole proprietor is solely held personally responsible for the losses. 2. Lack of continuity: The other disadvantage of sole proprietorship is that business cannot be continued after the death of business thus business dies with owner.