A person wants to start a new business, they will need to consider what type of business is right for them. The simplest form of business is a sole proprietorship: A business owned and operated by one individual. A sole proprietorship is uncomplicated to setup. It involves little paperwork, and has few legal fees. If a businessperson decides that they cannot start a business alone, they may wish to set up their business as a partnership. A partnership, in most cases, is a business with two or more people carrying out the day-to-day activities involved in the business; the law does not set a limit on how many people can be involved in a partnership. Like a sole proprietorship, a partnership has limited liability: business debts will be paid with seized assets of the owner when money is not available. Although liability between the two types of business is similar, the structuring is quite different. When starting a new small business people must make a variety of difficult decisions one of which is trying to decide which type business structure will do the job best. It is essential to have an overview of the structure in both of these types of businesses.
There are many things to consider when deciding between a sole proprietorship and partnership. One of the main factors in choosing a type of business is the liability issue. If a business is set up as a sole proprietorship, legally the business will be considered and extension of the owner. This means that the owner assumes all responsibilities for the business. The owner of a sole proprietorship is personally responsible for all the debts of their business. Therefore, the owner of the business will have to give up all their personal assets if the business fails. A partnership has similar liability, although you are responsible for all the other partnersâ€™ mistakes. If one partner makes a bad financial decision all the other members suffer.