Private ownership is a characteristic of a small business where a business is owned and operated privately. The forms in which the small business may be owned and operated differ according to the number of people operating, organizing, and managing a business. Sole proprietorship, partnerships and corporations are the three basic forms of privately owned business structures.
Sole proprietorship is a form of business structure whose ownership and operation depends on a single individual. It forms a common business structure for many small businesses because of the flexibility, low cost and ease of formation. The person who owns the business has personal and unlimited liability of debts. On the other hand, partnership is a type of private business owned by more than one person. The ownership and operation of the business is by two or more individuals. Partnership can be further classified into two forms, general and limited partnerships. General partnership involves unlimited liability common to all the partners while limited partnership is characterized by at least one partner having some liability which is limited to his or her share (Goosen, 2006). There should also be at least one partner who has full liability. In private corporation ownership, legal identity different from those of the business proprietors is established. An individual is included in the ownership of shares, but he or she does not bare any legal responsibility over the shares. Legal entity is an aspect that differentiates corporation ownerships from the other forms. Sole proprietorship and partnerships are easy to set up because distinct entities are not considered. Liability, claiming personal returns taxes and dissolution are common aspects in sole proprietorship and partnership. Partnership and corporation bare the similarity that they are both operated and owned by a number of people (Goosen, 2006).
Advantages of sole proprietorship include a low starting cost, flexibility and direct business control, minimal regulatory burden, and all profits going to a single individual. The disadvantages include unlimited liability, taxable income at individual rate, and high taxation bracket especially if the business is profitable. The other shortcoming is the fact that the business will be affected if the individual is absent from work due to unavoidable reasons. It is easy to start a partnership since start-up capital is shared among the partners equally (Goosen, 2006). The other advantage is the equal share on running and managing the business. Profits and assets are collectively shared. Using a combination of skills and knowledge from different partners leads to sound decision-making, innovation, and effective problem solving. The tax advantage is another benefit. Partnership has little government regulations. The disadvantages include unlimited liability, difficulty in finding a suitable partner, high chances of conflicts between partners, and financial responsibility of the business decisions made by a partner especially where contracts are involved. Besides, an individual does not enjoy full profit since it has to be shared equally among the partners. For private corporation, the advantages include limited liability, transferable ownership and ease of raising capital. Having separate legal entity and low level of taxes are other added advantages. The limitations of corporation include conflicts that may arise between directors and shareholders, close regulation, and a high cost of incorporation compared with the other two forms. Heavy annual documentation may also be a challenge to starting a corporation (Goosen, 2006).
I am planning to form a private poultry farming business. The most appropriate private business ownership I will adopt is the sole proprietorship. The simplicity and the cost of formation are the main reasons why I will use it. The fact that all the profits I will derive from the business belong exclusively to me motivates me to adopt this form of business ownership structure. Sole proprietorship will give me a chance to self-reliance on skills, knowledge and creativity in operating, organizing and managing a business without assistance from other people. Dealing with unlimited liabilities and managing finances will be the only challenge to ponder about compared with the other forms of private business ownership, which are characterized by major shortcomings.
Goosen, W. (2006). Forms of Business Ownership. Johannesburg: Lex Patria.