Corporation vs. Sole Proprietorship and Partnership Structures
This paper examines three fundamental business structures—sole proprietorship, partnership, and corporation—and argues that the corporate structure is the most suitable model for a multinational firm such as McDonald's. The paper identifies the key weaknesses of sole proprietorship, including unlimited personal liability and limited capital-raising ability, then evaluates the disadvantages of partnership, such as joint liability, profit-sharing disputes, and structural instability. It concludes by highlighting the core advantages of the corporate structure: perpetual existence independent of ownership, transferable stock, protected personal assets, and flexible management change—all of which align with the operational scale and complexity of a global enterprise.
- Introduction: Paper scope and McDonald's structural choice
- Review of Sole Proprietorship: Liability and capital limits of sole ownership
- Strengths and Weaknesses of Partnership: Partnership benefits and risks for multinationals
- The Corporate Business Structure: Corporate advantages: liability, stock, and continuity
- Conclusion: Corporate structure best suits McDonald's operations
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What makes this paper effective
- The paper uses a clear comparative framework, evaluating each structure against the practical needs of a real-world multinational before making its recommendation.
- Disadvantages of each alternative structure are directly tied to McDonald's specific context, making the argument feel applied rather than abstract.
- The logical progression from weakest to strongest model builds a cumulative case that leads naturally to the corporate structure recommendation.
Key academic technique demonstrated
The paper demonstrates elimination-based argumentation: rather than simply advocating for the corporate structure outright, it first systematically disqualifies sole proprietorship and partnership by mapping their known weaknesses onto the operational realities of a large multinational. This technique strengthens the ultimate recommendation by showing that alternatives have been genuinely considered and found wanting.
Structure breakdown
The paper opens with a brief statement of purpose, then moves through sole proprietorship (advantages acknowledged, then fatal disadvantages identified), partnership (similarly treated), and finally the corporate structure (advantages only, reinforcing the conclusion). A short concluding paragraph ties the analysis back to McDonald's. The structure is linear and argument-driven, making it accessible for undergraduate business readers.
Introduction
This paper argues that the corporate business structure is the ideal choice for a multinational firm such as McDonald's. It defines the merits that a firm of McDonald's scale can gain from this structure, while also examining the two principal alternatives — sole proprietorship and partnership — and weighing their respective strengths and weaknesses against the demands of global operations.
Review of Sole Proprietorship
Sole proprietorship is regarded as one of the least expensive and easiest ways to start a business compared to the corporate or partnership models. In this structure, the business and its owner are treated as the same legal entity. However, this arrangement carries significant disadvantages that, in the case of McDonald's, would create serious risks.
First, because there is no legal distinction between the owner and the business, any legal or financial trouble affecting the owner directly jeopardizes the entire enterprise. For a firm operating at a multinational level, it is extremely risky to vest full responsibility in a single person or entity.
Sole proprietorship also imposes very limited ability to raise capital. Selling shares or ownership interests to attract investment is effectively impossible under this model, which also makes it difficult to obtain loans or other forms of funding. Furthermore, the owner must manage every aspect of the business — including product and service development, accounting, customer service, and marketing. While many sole proprietors have deep expertise in their core trade, they may lack knowledge in other critical areas. For McDonald's, comprehensive understanding of diverse markets, competitive dynamics, and operational functions is essential, making sole proprietorship wholly inadequate.
Strengths and Weaknesses of Partnership
The partnership structure offers several notable advantages. It is relatively straightforward to establish, and because ownership is shared, the collective ability to generate funds increases substantially — partners may individually have greater borrowing capacity and can contribute more capital to the business. Prospective employees can also be attracted by the incentive of eventually becoming a partner, which can introduce fresh ideas and a wider range of skills and knowledge — both critical assets for any multinational firm. As Swann (1993) notes, partnerships are also cost-effective since each partner typically brings specialized expertise to a distinct area of the business, and the model fosters moral support, creative brainstorming, and collaborative energy among participants.
Despite these advantages, the partnership model carries drawbacks that could create serious problems for McDonald's. Partners are individually and jointly liable for one another's actions, meaning that the consequences of one partner's decision may fall on the entire group. Profit-sharing also requires that partners carefully assess the relative value of each other's time and skills — a process demanding significant coordination and patience that not every partnership can sustain.
Because decisions are shared, disagreements are common. Partnerships are typically long-term commitments, and a dramatic change in the business environment could precipitate a damaging split — a risk McDonald's cannot afford. Contractual mutual agreements often impose limitations that could hinder the firm's ability to expand or evolve. Additionally, a partnership may dissolve upon the death or withdrawal of a single partner, making it a structurally volatile arrangement. Given McDonald's global footprint and complexity, the sudden loss of one partner could inflict significant harm on the overall business.
Conclusion
All of the above-mentioned advantages of the corporate structure give a clear indication that McDonald's would perform far better under it. The analysis demonstrates how much the firm can prosper — and what competitive and operational advantages it stands to gain — as a corporation, rather than operating as a sole proprietorship or a partnership.
References
Swann, P. (1993). Corporate vision and rapid technological change. Routledge.
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