Merits And Demerit

1. Describe the three types of business with its merits and demerits.

Types Of Business :

A. Sole Proprietorship

B. Partnership

C. Joint Stock Company

Sole Proprietorship :

Sole proprietorship is a business which is owned by only one owner. It is simple and inexpensive, compared to other organizational structures. For example : Home tuition, Beauty Parlour etc Merits :

1. Advantage of sole proprietorship is that tax time is less complicated. The business owner does not have to pay corporate taxes

2. Direct control on decision making.

3. Less working capital required for start-up.

4. All profit go directly to owner.

Demerits :

1. Difficult to raise capital on your own.

2. Limited life, if a business owner dies, the business dies as well.

Each shareholder owns company stock in proportion. Joint stock holders may buy or sell these shares freely in the market. For example : Banks, Mobile networks, etc. Merits :

1. Joint Stock Company has the opportunity to raise huge capital than other types of business.

2. Change in membership or a transfer of stock has no effect on the continued existence of the company.

3. If the stockholder dies the business does not to an end.

4. The liability of a shareholder is limited.

5. The shares of the public company are transferable without any restriction. A shareholder can sell his shares at any time to anybody in the stock exchange.

6. A company can hire the services of professional manager for its functional areas because of its financial strength.

Demerits :

1. The formation of a joint stock company is very difficult, time taking and expensive as compared to any other form of organisation.

2. There are a lot of legal requirements to start a company since a company is created under law, its formations a complex task.

3. In case of company, there are two systems of tax payment. First, on the basis of profit earned by the company. Second, on the basis of dividend earn by the shareholders. So the shareholders suffer from double