by one person (Kishel, 1981, p. 37). The advantages of this form are control over the business, ease of startup and discontinuation, and relatively simple tax return preparation (the owner simply pays personal income taxes on the profits). Because the owner has complete autonomy over the profits, he or she may choose to reinvest this income in the business or take the profits as income.
Sole proprietorship has several disadvantages: unlimited liability of the owner, including possible loss of personal property to creditors in case of business failure; limited ability to raise investment capital; the need to be versed in all aspects of the business; difficulty retaining capable employees (larger firms frequently offer more competitive salary and benefits packages); and limited life of the business.
Partnerships, the second legal structure, alleviate some problems of the sole proprietorship. Partners may have complementary expertise, such as one individual who knows marketing and the other who knows finance. As in sole proprietorships, partners pay on
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