Sole Proprietorship. Asole proprietorship (sole trader, single proprietorship or individual proprietorship)is a business operated by a person as his own personal propertyA sole proprietorship (sole trader, single proprietorship or individual proprietorship) is a business operated by a person as his own personal property. It is the simplest and the cheapest method of starting a business, because a sole proprietor invests his or her own capital and personal assets (anything that belongs to the person), or gets a loan from a bank. He or she alone decides what he or she will do to achieve the objective of any business – profit. Agents and employees may be hired but the owner has all the responsibility; all the profits and losses are the owner’s. For example, one might conduct a computer service business as an individual proprietorship. It would be very much like buying a house as an investment and renting it out. The person operating the business need not use his or her own name as the name of the business; it may be operated under an assumed or trade name. Such a trade name would have to be registered with the proper state or local official, however. Employees of the business are the personal employees of the owner. The salaries and wages paid to employees of the business and other business expenses are deductible in determining taxable income. So, to start a sole proprietorship, you only require the capital to invest and, of course, knowledge of the local laws. Partnerships: Ø General Partnership A partnership is a voluntary association designed to carry on a business for profit. In a partnership, no less than two, and no more than twenty people pool their property, capital (including intellectual capital), efforts, and managerial talents to do business and gain profits. The co-owners make a written agreement regarding how to invest capital and share dividends, called an Agreement on Capital and Dividends Share. However, no express agreement to establish a general partnership is necessary. All that is required is that the parties intend to have the relationship that the law defines as a partnership. In a general partnership,each of the partners is an owner and will have a right to share in the profits of the business. Unless otherwise agreed, a partner will not be considered an employee and will not be entitled to wages for the services he or she renders to the partnership. As with a sole proprietorship, each partner will be personally liable for any losses suffered by the partnership business, even if the losses exceed the individual partners’ contributions to the enterprise. Ø Limited Partnership The limited partnership (limited partnership was established by the Limited Partnership Act of 1907),a variation of the ordinary or general partnership, was designed to combine the informalities of the partnership with the capital-raising advantages of the corporation. It permits investors (the limited partners) who do not engage in management (so-called “silent partners”) to share in the profits of the business without becoming personally liable for its debts. There are limitations to the numbers of partners: minimum of two and maximum of twenty (there is no maximum for accountants and solicitors). The partners are free to choose any name for the firm; however, “limited” must not be the last word of the name. Ø Joint Venture When two or more persons agree to join in a single transaction or project their partnership is called a joint venture. The partners in a joint venture agree to control and manage the business together. They must also agree to share profits and losses, usually on the basis of each partner’s ownership interest in the property or project. The elements of a joint venture are (1) an express or implied agreement to carry on an enterprise; (2) a manifestation of intent by the parties to be associated as joint venturers; (3) a joint interest as reflected in the contribution of property, finances, effort, skill, or knowledge by each party to the joint venture; (4) a measure of proprietorship of joint control of the enterprise; and (5) a provision for the sharing of profits or losses. The distinction between a partnership and a joint venture is not very important. The major distinction between them is that a joint venture relates to a single enterprise or transaction and a partnership relates to a continuing business. Both require a meeting of the minds and contract formation. However, some courts hold that the requirement for joint ventures is less formal and may be implied entirely by conduct. Further, they state that, with joint ventures, any agreement that does exist need not cover as many terms as are necessary for a partnership. For instance, an agreement to jointly buy, develop, and resell one particular plot of land may be considered a joint venture. On the other hand, an agreement to jointly buy, develop, and resell land on a long-term basis may well be construed as a partnership.
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