JINNAH UNIVERSITY FOR WOMENASSIGNMENT NO. 3

NAME:MAHA RAZABATCH:BS(SE)/2016TEACHER:MISS MEHWISH

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SOLE PROPRIETORSHIPDEFINITION:

When a business is owned and controlled person it is called a sole proprietorship bus Through she/he can employ as many workers needed for day to day operations the owner remains with the single person.she/he is the one who initially invested into the business.

CHARACTERISTICS:1. Stockholders' equity:

Stockholders' equity is to a corporation what owner's equity is to a sole proprietorship. Owners of a corporation are called stockholders (or shareholders), because they own (or hold) shares of the company's stock. Stock certificates are paper evidence of ownership in a corporation.

2. Legal Formalities:

To be a sole proprietorship, you do not have to take any formal or legal steps at the federal, state, or local level, Weltman says. "As long as you are the only owner, you automatically become a sole proprietorship by conducting business," 

3. Liablities:

A distinct disadvantage, however, is that the owner of a sole proprietorship remains personally liable for all the business's debts. So, if a sole proprietor business runs into financial trouble, creditors can bring lawsuits against the business owner.

4.   Capital:

In sole proprietorship, the capital is normally provided by the owner himself. However, ifadditional capital is required, such capital can be increased by borrowing.

5. Easy   Dissolution:

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The sole proprietorship can be easily dissolved, as there are no legal formalities involved in it.

6.  Easily   Transferable:

Such type of business can easily be transferred to another person without any restriction.

7. Freedom   of   Action:

In sole proprietorship, single owner is the sole master of the business, therefore, he has full freedom to take action or decision.

8.  Formation:

Formation of sole proprietorship business is easy as compared to other business, because it does not require any kind of legal formality like registration etc.

9.  Legal   Entity:

In sole proprietorship, the business has no separate legal entity apart from the sole traders.

10. Legal   Restriction:

There are no legal restrictions for sole traders to set up the business. But there may be legal restrictions for setting up a particular type of business.

11. Limited   Life:

The continuity of sole proprietorship is based on good health, or life or death of the sole owner.

12. Management:

In sole proprietorship, the control of management of the business lies with the sole owner.

13. Ownership:

The ownership of business in sole proprietorship is owned by one person.

14. Profit:The single owner bears full risk of business, therefore, he gets total benefit of the business as well as total loss.

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15.  Size:

The size of business is usually small.The limited ability and capital do not allow theexpansion of business.

16.  Success   of   Business:

The success and goodwill of the sole proprietorship is totally dependent upon the ability of the sole owner.

17.  Unlimited   Liability:

A sole proprietor has unlimited liability. In case of insolvency of business, even the personal assets are used by the owner to pay off the debts and other liabilities

ADVANTAGES:

1. Easier to set up2. Freedom of independent working3. Freedom of choice4. Close contact with the customers5. Single ownership of all profits

DISADVANTAGES:1. Unlimited liability2. Limited amount of capital3. Not easy to get external financing4. Cost of production remains high5. Discontinuity of business

EXAMPLES:1. Small services or retail shop2. Bakery3. Restaurant4. Roadside produce stand5. A small tea stall6. Street Hawker

PARTNERSHIP:DEFINITION:

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Owned by two or more people Share profits equally. ( unless otherwise agreed upon)

CHARACTERISTICS:The principle characteristics of the partnership form of business organization are:

1. Shareholder/Partnership Agreement Planning :

No business plan is complete without a shareholder or partnership agreement containing buy/sell provisions that allow for the orderly transfer of ownership interests upon retirement, disability, death or disagreement. Business advisors generally agree that life insurance is the most efficient means of providing buy/sell funding on the death of a shareholder or partner.

2. Liabilities:

In limited partnerships and limited liability partnerships, a partnership can even offer a degree of liability protection.

3. Legally:

To get partnership legally registered , there is very easy and time saving procedure for partnership registration

4. Mutual Contribution. :

There cannot be a partnership without contribution of money, property or industry (i.e. work or services which may either be personal manual efforts or intellectual) to a common fund.

5. Division of Profits or Losses:

The essence of a partnership is that each partner must share in the profits or losses of the venture.

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6. Co-Ownership of Contributed Assets:

 All assets contributed into the partnership are owned by the partnership by virtue of its separate and distinct juridical personality. If one partner contributes an asset to the business, all partners jointly own it in a special sense.

7. Limited Life:

 A partnership has a limited life. It may be dissolved by the admission, death, insolvency, incapacity, withdrawal of a partner or expiration of the term specified in the partnership agreement.

8. Unlimited Liability:

All partners (except limited partners), including industrial partners, are personally liable for all debts incurred by the partnership. If the partnership can not settle its obligations, creditors' claims will be satisfied from the personal assets of the partners without prejudice to the rights of the separate creditors of the partners.

9. Income Taxes:

Partnerships, except general professional partnerships, are subject to tax at the rate of 34% (in 1998), 33% (in 1999) and 32% (in 2000 and thereafter) of taxable income.

10. Partners' Equity Accounts:

 Accounting for partnerships are much like accounting for sole proprietorships. The difference lies in the number of the partners' equity accounts. Each partner has a capital account and a withdrawal account that serves similar functions as the related accounts for sole proprietorships.

ADVANTAGES:• More capital than a sole trader. • Responsibilities are split. • Any losses are shared between partners. • More ideas are introduced into the business

DISADVANTAGES:

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• Unlimited liability. • No continuity, no legal identity. • Partners can disagree on decisions, slowing down d making. • If one partner is inefficient or dishonest, whole busi suffers. • Limited capital, there is a limit of 20 people for any partnership.

EXAMPLE:

COMPANY:DEFINITION:

A company is any entity that engages in business. Companies can be structured in different ways. For example, your company can be a sole proprietorship, a partnership, or a corporation. Depending on which different type of company you're dealing with, it may be owned by one person or a group of people.

CHARACTERISTICS: Some of the most important characteristics of a company are as follows:

1. Shareholder:

A shareholder is any person, company or other institution that owns at least one share of a company's stock. Because shareholders are a company's owners, they

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reap the benefits of the company's successes in the form of increased stock valuation

2. Legal Formalities:

Business Startups in Pakistan require a host of corporate formalities which may vary due to. Legal Person Involved 

3. Liabilities:

A liability is a company's financial debt or obligations that arise during the course of its business operations. Liabilities are settled over time through the transfer of economic benefits including money, goods or services.

4. Rights:

Your company has the right to sue for certain instances, such as a breach of contract, unfair competition or nonperformance.

5. Separate Legal Entity:

Under Incorporation law, a company becomes a separate legal entity as compared to its members. The company is distinct and different from its members in law. It has its own seal and its own name, its assets and liabilities are separate and distinct from those of its members. It is capable of owning property, incurring debt, and borrowing money, employing people, having a bank account, entering into contracts and suing and being sued separately.

6. Limited Liability:

The liability of the members of the company is limited to contribution to the assets of the company upto the face value of shares held by him. A member is liable to pay only the uncalled money due on shares held by him. If the assets of the firm are not sufficient to pay the liabilities of the firm, the creditors can force the partners to make good the deficit from their personal assets. This cannot be done in the case of a company once the members have paid all their dues towards the shares held by them in the company.

8. Separate Property:

A company is a distinct legal entity. The company's property is its own. A member cannot claim to be owner of the company's property during the existence of the company.

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9. Transferability of Shares:

Shares in a company are freely transferable, subject to certain conditions, such that no share-holder is permanently or necessarily wedded to a company. When a member transfers his shares to another person, the transferee steps into the shoes of the transferor and acquires all the rights of the transferor in respect of those shares.

11. Capacity to sue and being sued:

A company can sue or be sued in its own name as distinct from its members.

12.Separate Management:

A company is administered and managed by its managerial personnel i.e. the Board of Directors. The shareholders are simply the holders of the shares in the company and need not be necessarily the managers of the company.

13. One Share-One Vote:

The principle of voting in a company is one share-one vote i.e. if a person has 10 shares, he has 10 votes in the company. This is in direct distinction to the voting principle of a co-operative society where the "One Member - One Vote" principle applies i.e. irrespective of the number of shares held, one member has only one vote.

ADVANTAGES:1. .It can raise additional funds through the sale of stock.2. Shareholders can easily transfer the ownership by selling their stock3. Individual owner’ liability is limited to the value of stock they are holding i

n the Company.

Disadvantages:1. It is restricted by more regulations, more closely monitored by govern

mental agencies and are more costly to incorporate than other forms of the organizations.

2. Profit of the business is taxed by the corporate tax rate. Dividends paidto shareholders are not deductible from corporate income, so this Part  of in come is taxed twice as the share holders must declare Divide ends as theirpersonal income and pay personal income taxes

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 too.

Examples:

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