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  • Writer's pictureMichael Chan - Bida & Co.

Pros and cons of a sole proprietorship and partnership:

Pros:

Easy to set up: A sole proprietorship only requires one person to start and the process of setting it up is relatively simple.

Independence: The owner of a sole proprietorship can independently make decisions about the direction of the business and make quick decisions without needing the agreement of others.

Tax advantages: A sole proprietorship has a lighter tax burden as they only need to pay personal income tax, and the tax reporting process is relatively straightforward.


Cons:

Personal liability: The owner of a sole proprietorship is personally responsible for all risks and losses associated with the business, which can be a significant burden.

Limited funding: A sole proprietorship can only rely on its own funds to operate, which can limit its ability to expand.

Pros and cons of a partnership:


Pros:

Adequate funding: A partnership has multiple partners who can jointly invest in the business, providing it with sufficient funds to expand.

Shared responsibility: The risks and responsibilities of a partnership can be shared among multiple partners, thereby reducing the burden on any one individual.

Resource sharing: Partners in a partnership can share resources and expertise, which can help the business to develop.


Cons:

Conflicting opinions: Decision-making in a partnership can be slowed down by conflicting opinions, requiring consensus among partners.

Profit sharing: Profit-sharing in a partnership can be complex, requiring careful consideration of each partner's interests to avoid potential conflicts.


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