Agency theory reading report

Partnerships

Corporations

Limited liability companies and limited liability partnerships.

1. 
   Sole Proprietorship
   

A sole proprietorship is unincorporated business organization owned by one person. The business is easy to start because there are no many legal requirements. The advantages of sole proprietorship business include:

1. 
   They are easy and cheap to start
   
2. 
   There are few legal and regulations by the government
   
3. 
   They are subject to lower tax compared to the corporations
   

The disadvantages of sole proprietorship include:

1. 
   The business has unlimited liability. If the sole proprietorship is unable to pay for its creditors, the personal property of the owner will be auctioned so that the creditors can recover their funds.
   
2. 
   The life of the sole proprietorship limited to the life of the owner. If the owner dies, the sole proprietorship will also stop to operate.
   
3. 
   The sole proprietorship can only raise a limited amount of capital.
   

2. 
   Partnership
   

A partnership is legal agreement between two or more people to start a business. The advantages of the partnership include:

1. 
   They are easy and cheap to start
   
2. 
   There are few legal and regulations by the government
   
3. 
   They are subject to lower tax compared to the corporations
   

The disadvantages of partnership include:

1. 
   The business has unlimited liability. If the partnership is unable to pay for its creditors, the personal property of the owner will be auctioned so that the creditors can recover their funds.
   
2. 
   The life of the partnership limited to the life of the owner. If the owner dies, the partnership proprietorship will also stop to operate.
   
3. 
   The partnership can only raise a limited amount of capital.
   

3. 
   Corporations
   

A corporation is a legal entity created by the state that is separate from the owners and the managers. The advantages of the corporation include:

1. 
   The corporation has limited liability. If the corporation is unable to pay for its creditors, the personal property of the owners will not be auctioned so as to pay the creditors.
   
2. 
   The corporation is able to raise large amount of capital
   
3. 
   The shares of the company are easily transferable than the interest in the unincorporated business such as partnerships.
   
4. 
   There life is not limited. Even managers quit and the shareholders sell their shares the corporation will still continue to operate.
   

Disadvantages of the corporation include:

1. 
   The corporation suffers heavy taxes. They pay the corporation tax and the owners are deducted tax when they are paid dividends. The congress in US created S corporations that are taxed like the partnerships.
   
2. 
   The corporations are faced with many legal and other regulations by the government
   

4.