Forum 1

Forum 1
Name
Institution

Forum 1
A proprietorship is an unincorporated structure of doing business that is run and owned by a single investor with no input from others thereby ensuring that there is no clear distinction between the business owner and the business itself. As such, the sole proprietor is responsible for any and all liabilities, losses and debts associated with the business, as well as being entitled to all the profits. The opportunity to be in control acts as a strong motivator for sole proprietors, making them disregard the possibility of financial losses associated with their form of business, a risk that is minimized in a company (Trevino & Nelson, 2011).
The major motivator for sole proprietors is the ease of starting such a venture. It involves very little paperwork and can be set up within a short period of time thereby making it very popular. In fact, they are not restricted by rules that govern other forms of businesses. In addition, there is greater autonomy and faster decision making without the need to consult or even report to a management board, shareholders, or partners. In fact, the sole proprietor gets to control all the decisions concerning earnings and expenditure. Besides that, a sole proprietor can receive tax benefits by reporting earnings through personal income earnings and as personal tax returns. This is the better option when compared to reporting for business tax returns that is slower and more costly (Trevino & Nelson, 2011).

Also, there is no need to prepare comprehensive accounting books for the business, such as annual financial reports, since the business owner is involved in management and is aware of all that is going on within the company. Additionally, sole proprietors have greater management flexibility to include changing careers, working part-time and even closing down the business since this can be done with minimal bureaucracy (Bagley, 2015).
Despite the listed advantages that have been mention, and which act as the greatest motivators for sole proprietors, it is important to note that they face some unique risks. Firstly, there is greater risk of liability since personnel assets are included in the business and can be part of a claim. As a sole proprietor, there is no legal distinction between business and personnel assets, thereby making the owner personal liable for any debts and losses that the business may incur. Companies have the capacity to limit owner liabilities by creating a legal distinction between business and personnel assets thereby ensuring that no claims can be attached to the owner’s personal assets (Bagley, 2015; Trevino & Nelson, 2011). Secondly, sole proprietorships have limited potential for growth and lower bottom line since they appear unprofessional. This is notable when dealing with other business entities (such as banks and financial institutions) since they consider the business an unjustified risk. This leaves the owner total reliant on savings and other sources of capital (Bagley, 2015).
One must accept that the decision between starting a business as a sole proprietorship or company is dependent on the apparent benefits and drawbacks. Sole proprietorships are preferred because they are easy to start, how lower costs, require simple tax needs, and are autonomous. On the other hand, they are considered as greater sources of risks because they have limited professionalism, lack financial controls, have difficulties in raising capital, and have greater liability by exposing personal assets to business risks.

References
Bagley, C. (2015). Managers and the Legal Environment: Strategies for the 21st Century (8th ed.). Boston, MA: Cengage Learning.
Trevino, L. & Nelson, K. (2011). Managing Business Ethics: Straight talk about how to do it right (5th ed.). Hoboken, NJ: John Wiley & Sons.