"company form of organisation emerged essential because of the limitations of the sole proprietorship and partnership forms of organisation" . Discuss
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There are several reasons why companies have the upper hand when compared to sole proprietorship and partnerships. These are some of the reasons why:
1. If a company runs out of funds, its owners are usually not liable while for partnerships and sole proprietorship the owners are personally responsible for business debts and if the assets cannot satisfy the debt creditors will go after the property of the owner's bank account, asset or house
2. For companies, only salaries (not profits) are taxed by the government while for sole proprietorship or partnership the earning are subject to self-employment taxes.
3. Companies have a continuous life since the company doesn't come to an end upon the death of its directors, shareholders or employers while for sole proprietorships or partnerships the business will come to an end upon the death of the owners
4. Companies have many ways of raising capital through selling shares of stock, creating new stock, and investors are assured of no personal liability. On the other hand, sole proprietors and partnership depend on individual effort and limited ways of raising capital.
5. The transfer of ownership for companies is much easier since it may be sold to third parties without interfering with the business operation. On the other hand, sole proprietorship or partnership it cannot be sold as a whole instead the licenses, assets and business permit must be transferred one by one, and new bank accounts and tax ID will be required.
1. If a company runs out of funds, its owners are usually not liable while for partnerships and sole proprietorship the owners are personally responsible for business debts and if the assets cannot satisfy the debt creditors will go after the property of the owner's bank account, asset or house
2. For companies, only salaries (not profits) are taxed by the government while for sole proprietorship or partnership the earning are subject to self-employment taxes.
3. Companies have a continuous life since the company doesn't come to an end upon the death of its directors, shareholders or employers while for sole proprietorships or partnerships the business will come to an end upon the death of the owners
4. Companies have many ways of raising capital through selling shares of stock, creating new stock, and investors are assured of no personal liability. On the other hand, sole proprietors and partnership depend on individual effort and limited ways of raising capital.
5. The transfer of ownership for companies is much easier since it may be sold to third parties without interfering with the business operation. On the other hand, sole proprietorship or partnership it cannot be sold as a whole instead the licenses, assets and business permit must be transferred one by one, and new bank accounts and tax ID will be required.
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