These businesses are the most common and simplest ones since they just have one owner who runs the business by himself and is self employed. These types of businesses are east to start since they do not require much, if not any, legal obligations, and paperwork.
It is important to note that the sole trader assumes the “all” the responsibility of the business. This includes looking after all the operations, issues, debts, loans and others. The problem with this business is that the sole trader has unlimited liability for the business and in case of bankruptcy, the sole trader would have to pay off the debts and claims from his pocket or by selling off the company’s assets and the sole trader’s assets as well (Hicks & Goo, pp. 13-18). Important here to note that the law does not provide the sole trader’s company, the status of a “separate legal entity” which other forms of business enjoy having. These businesses do not have the option of equity financing or in simple words issuing bonds and stocks for raising capital. Moreover, if the sole trader goes for debt financing, even then, the loan would be on his name and not on the company’s name and he, not the company, would be liable for paying off the loan (Mancuso, pp. 65-69).
The second type of business would be of partnerships where two or more partners jointly start their business and share the responsibilities and ownership of the business. Unlike sole proprietor where only one person is responsible for everything, in partnerships, all the partners share the responsibility of running the business. However, their liability remains unlimited. This is because of the fact that partners are liable for any decision whether taken by him or any other partner. Moreover, if one partner runs away than the rest would have to pay his or her debts liabilities from their pockets (Martin, pp. 41-49). These types of businesses are easy to form and easy to dissolve as