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Advantages and Disadvantages of Various Business Types

Home » Entrepreneurship » How Do I Determine What Kind of Business Should I Start » Advantages and Disadvantages of Various Business Types

There are various business types you can get into. You have to prepare and plan ahead to know which one is best for yourself. In order to know which one is best for you here are some advantages and disadvantages of each type:

• Sole Proprietorship: One of the three most popular types of businesses to start is the sole proprietorship. A sole proprietorship is a great business to get started with if you can handle being a loner. Here are the advantages to starting this type of business:
o Low start-up costs
o Freedom
o Direct control
o Tax advantage
o You get all the profits
The disadvantages are:
o Liability
o You quit or die business closes
o Difficult to raise capital
• Partnership: With a partnership you have someone to share the business with you. Here are the advantages to this type of business:
o Ease of formation
o Low start-up costs
o Venture capital
Here are the disadvantages:
o Liability
o Divided authority
o Difficult to raise capital
o Hard to find good partners
• Corporation: Of all the business types, this one provides more advantages and also disadvantages. Here are the advantages:
o Limited liability
o Ownership is transferable
o Business doesn't close because people quit business
o Business becomes a legal entity
o Easier to raise capital
The disadvantages are:
o Closely regulated
o Most expensive to organize
o Some restrictions
o Extensive record-keeping
o Double taxation

Every business has its pros and cons. You just have to decide what the best type is for you and go with it.

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