Explain the different forms of business units(sole proprietorship, partnership, limited company) available, highlighting the benefits and limitations of each.

Introduction to Accounting a+

There are three types of business units: limited company, partnership, and sole proprietorship.

One person can own a sole proprietorship, which is an entity that has no liability whatsoever for the debts it incurs. These business models offer many benefits, such as their ease of setup as well as the freedom to make decisions. The owner is responsible for any loss.

Although it is very similar to sole proprietorships in some ways, a partnership involves more than one person sharing ownership of the venture. It allows partners to pool their skills and resources to maximize success. This type of partnership also offers some protection against potential problems, since assets are not legally used to pay off outstanding debts. However, there are risks of disagreements and conflicts between the partners.

Lastly, a limited company is an independent legal entity where shareholders’ liabilities are limited only to amount they have invested into it. It provides security as no personal wealth or profits can be taken from the shareholders should an organization fail.

These three types offer various levels of advantages depending on the goals that each entrepreneur is trying to achieve. It’s important to choose one form so you can get your desired results while also allowing for flexibility and possibility to make changes later.

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