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BUSINESS COMPANIES
Business Companies: Business Entity Implications for Contracts
Sole Proprietorship
A sole proprietorship is defined as a business owned by one person. The advantages include whole ownership entitled only to the proprietor himself, low taxes, and rarer complications for launching (Treece, 2018). However, there are also pitfalls, such as less protection when under threat of legal cases, profit and losses are the only income, and seeking new businesses would be an issue. The business owner is responsible for making negotiations, decisions, judgments, and signing and approving contracts. A sole proprietorship does not protect the business owner as he is the only person running the person, and if anything goes wrong with the supplier, he could be easily sued (Lawrence, n.d.). As a single person owns the business, the contracts authenticity is low.
Partnership
A business partnership is a firm started between two or more people who share their skills and risks along with profits and losses. The pros of a partnership include less for laities as legal obligations are handled conveniently (Korchak, 2017). The partnership supports each other, making it easier to start sharing the burden individually. With collective power, decision-making becomes better as knowledge and diverse opinions are considered (Korchak, 2017). On the contrary, the cons include unlimited liability, legal existence being questioned by partners living overseas, restricted capital access, and seeming to be temporary business entities due to a lack of independent existence and prestige (Korchak, 2017).
Contract creation and agreeing to its terms and conditions is the process that is analyzed, reviewed, and approved by all partners collectively (Net Lawman, 2021). Signatures of all partners are needed to finalize a partnership contract;...…into certain contracts, owning of assets, share liabilities and pay taxes (Investopedia, 2022). It is a legal entity where some firms prefer including Inc. with their names. Pros of having a business corporation include safety and protection, business steadiness, easier obtaining of capital, and safeguarding personal liability (Schooley, 2022). Cons include the time-taking process, double taxation, inflexible formalities, and certain etiquette for following before making it legal (Schooley, 2022).
Just as in the case of LLC, individuals of the business corporation are assigned powers in the agreement that gives them legal authority to sign, negotiate and approve contracts (Up Counsel, 2020). Actual and implicit authorities play a major role in this regard as the former is about legal authority to explicitly form and regulate the contract while the latter is on an agent representing the others (Up Counsel,…
References
Fernando, J. (2022, July 20). Limited liability company (LLC). Investopedia. https://www.investopedia.com/terms/l/llc.asp
Grasshopper. (n.d.). Nuts and bolts: Nitty-gritty details, incorporating, and taxes. https://grasshopper.com/resources/jump-starting-and-growing-your-business/nuts-and-bolts/#
Hayes, A. (2022, January 23). LLC operating agreement. Investopedia. https://www.investopedia.com/terms/l/llc-operating-agreement.asp
Investopedia. (2022, January 3). Corporation. https://www.investopedia.com/terms/c/corporation.asp
Korchak, J. (2017, August 27). Advantages and disadvantages of a partnership business. Inform Direct. https://www.informdirect.co.uk/business-management/partnership-business-advantages-and-disadvantages/
Lawrence, G. (n.d.). What kind of liability does the owner of a sole proprietorship have? Chron. https://smallbusiness.chron.com/kind-liability-owner-sole-proprietorship-have-20636.html
Net Lawman. (2021, April). Partnership as business structure. https://www.netlawman.co.uk/ia/partnership-agreement
Schooley, S. (2022, June 29). Pros and cons of forming a corporation. Business News Daily. https://www.businessnewsdaily.com/15805-corporation-advantages-and-disadvantages.html
Treece, D.D. (2018, May 9). 5 sole proprietorship pros and cons. Fit Small Business. https://fitsmallbusiness.com/sole-proprietorship-pros-and-cons/
Up Counsel. (2020, October 9). Who can sign a contract for a company: Everything you need to know. https://www.upcounsel.com/who-can-sign-a-contract-for-a-company#actual-authority-and-apparent-authority
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