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Jerry is starting his own business - a boxing gym
Jerry is starting his own business - a boxing gym. He's ready to sign a lease to rent space in a local strip mall. He figures he can do almost everything himself, though he will need to hire a part-time employee on an "as needed" basis. His friend, Steve, has agreed to work when needed. Jerry wants to run the business as a sole proprietorship.
Identify at least 2 legal advantages and 2 disadvantages to this form of business ownership for Jerry's Boxing Gym.
Expert Solution
Advantages of a sole proprietorship;
- Few legal formalities. During the formation of a sole proprietorship, there are few legal requirements that are required in order to bring the business into operation. For one to start business operation one needs a license.
- Th profits belong to the owner of a business. The profits of a sole trader belong to them only and there is no profit sharing.
Disadvantages of a sole proprietorship;
- Unlimited liability. This is a situation where a sole trader will lose his or her personal property to meet the debt obligations that they have accrued.
- Limited capital for expansion. A sole trader has limited sources of capital because there is only one person that is contributing towards the capital structure of the business, unlike partnership where there are a number of people that contributes to the capital of the business.
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