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JINNAH UNIVERSITY FOR WOMEN
ASSIGNMENT NO. 3
NAME:MAHA RAZA
BATCH:BS(SE)/2016
TEACHER:MISS MEHWISH

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SOLE PROPRIETORSHIP
DEFINITION:
When a business is owned and controlled person it is called a sole proprietorship
bus Through she/he can employ as many workers needed for day to day operations
the owner remains with the single person.she/he is the one who initially invested
into the business.
CHARACTERISTICS:
1. Stockholders' equity:
Stockholders' equity is to a corporation what owner's equity is to a sole proprietorship.
Owners of a corporation are called stockholders (or shareholders), because they own
(or hold) shares of the company's stock. Stock certificates are paper evidence of
ownership in a corporation.
2. Legal Formalities:
To be a sole proprietorship, you do not have to take any formal or legal steps at the
federal, state, or local level, Weltman says. "As long as you are the only owner, you
automatically become a sole proprietorship by conducting business,"
3. Liablities:
A distinct disadvantage, however, is that the owner of a sole proprietorship remains
personally liable for all the business's debts. So, if a sole proprietor business runs
into financial trouble, creditors can bring lawsuits against the business owner.
4. Capital:
In sole proprietorship, the capital is normally provided by the owner himself. Howev
er, ifadditional capital is required, such capital can be increased by borrowing.
5. Easy Dissolution:

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The sole proprietorship can be easily dissolved, as there are no legal formalities inv
olved in it.
6. Easily Transferable:
Such type of business can easily be transferred to another person without any restri
ction.
7. Freedom of Action:
In sole proprietorship, single owner is the sole master of the business, therefore, he
has full freedom to take action or decision.
8. Formation:
Formation of sole proprietorship business is easy as compared to other business, be
cause it does not require any kind of legal formality like registration etc.
9. Legal Entity:
In sole proprietorship, the business has no separate legal entity apart from the sole
traders.
10. Legal Restriction:
There are no legal restrictions for sole traders to set up the business. But there may
be legal restrictions for setting up a particular type of business.
11. Limited Life:
The continuity of sole proprietorship is based on good health, or life or death of the
sole owner.
12. Management:
In sole proprietorship, the control of management of the business lies with the sole
owner.
13. Ownership:
The ownership of business in sole proprietorship is owned by one person.
14. Profit:

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The single owner bears full risk of business, therefore, he gets total benefit of the b
usiness as well as total loss.
15. Size:
The size of business is usually small.The limited ability and capital do not allow the
expansion of business.
16. Success of Business:
The success and goodwill of the sole proprietorship is totally dependent upon the ab
ility of the sole owner.
17. Unlimited Liability:
A sole proprietor has unlimited liability. In case of insolvency of business, even the
personal assets are used by the owner to pay off the debts and other liabilities
ADVANTAGES:
1. Easier to set up
2. Freedom of independent working
3. Freedom of choice
4. Close contact with the customers
5. Single ownership of all profits
DISADVANTAGES:
1. Unlimited liability
2. Limited amount of capital
3. Not easy to get external financing
4. Cost of production remains high
5. Discontinuity of business
EXAMPLES:
1. Small services or retail shop
2. Bakery
3. Restaurant
4. Roadside produce stand
5. A small tea stall
6. Street Hawker

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PARTNERSHIP:
DEFINITION:
Owned by two or more people Share profits equally. ( unless otherwise agreed
upon)
CHARACTERISTICS:
The principle characteristics of the partnership form of business organization
are:
1. Shareholder/Partnership Agreement Planning:
No business plan is complete without a shareholder or partnership agreement
containing buy/sell provisions that allow for the orderly transfer of ownership
interests upon retirement, disability, death or disagreement. Business
advisors generally agree that life insurance is the most efficient means of
providing buy/sell funding on the death of a shareholder or partner.
2. Liabilities:
In limited partnerships and limited liability partnerships, a
partnership can even offer a degree of liability protection.
3. Legally:
To get partnership legally registered , there is very easy and time saving
procedure for partnership registration
4. Mutual Contribution.:
There cannot be a partnership without contribution of money, property or industry
(i.e. work or services which may either be personal manual efforts or intellectual) to
a common fund.

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5. Division of Profits or Losses:
The essence of a partnership is that each partner must share in the profits or losses
of the venture.
6. Co-Ownership of Contributed Assets:
All assets contributed into the partnership are owned by the partnership by virtue
of its separate and distinct juridical personality. If one partner contributes an asset
to the business, all partners jointly own it in a special sense.
7. Limited Life:
A partnership has a limited life. It may be dissolved by the admission, death,
insolvency, incapacity, withdrawal of a partner or expiration of the term specified in
the partnership agreement.
8. Unlimited Liability:
All partners (except limited partners), including industrial partners, are personally
liable for all debts incurred by the partnership. If the partnership can not settle its
obligations, creditors' claims will be satisfied from the personal assets of the
partners without prejudice to the rights of the separate creditors of the partners.
9. Income Taxes:
Partnerships, except general professional partnerships, are subject to tax at the
rate of 34% (in 1998), 33% (in 1999) and 32% (in 2000 and thereafter) of taxable
income.
10. Partners' Equity Accounts:
Accounting for partnerships are much like accounting for sole proprietorships. The
difference lies in the number of the partners' equity accounts. Each partner has a
capital account and a withdrawal account that serves similar functions as the
related accounts for sole proprietorships.
ADVANTAGES:
• More capital than a sole trader.

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• Responsibilities are split.
• Any losses are shared between partners.
• More ideas are introduced into the business
DISADVANTAGES:
• Unlimited liability.
• No continuity, no legal identity.
• Partners can disagree on decisions, slowing down d making.
• If one partner is inefficient or dishonest, whole busi suffers.
• Limited capital, there is a limit of 20 people for any
partnership.
EXAMPLE:
COMPANY:
DEFINITION:
A company is any entity that engages in business. Companies can be structured in
different ways. For example, your company can be a sole proprietorship, a
partnership, or a corporation. Depending on which different type of company you're
dealing with, it may be owned by one person or a group of people.

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CHARACTERISTICS:
 Some of the most important characteristics of a company are as follows:
1. Shareholder:
A shareholder is any person, company or other institution that owns at least one
share of a company's stock. Because shareholders are a company's owners, they
reap the benefits of the company's successes in the form of increased stock
valuation
2. Legal Formalities:
Business Startups in Pakistan require a host of corporate formalities which may
vary due to. Legal Person Involved
3. Liabilities:
A liability is a company's financial debt or obligations that arise during the course of
its business operations. Liabilities are settled over time through the transfer of
economic benefits including money, goods or services.
4. Rights:
Your company has the right to sue for certain instances, such as a breach of
contract, unfair competition or nonperformance.
5. Separate Legal Entity:
Under Incorporation law, a company becomes a separate legal entity as compared
to its members. The company is distinct and different from its members in law. It
has its own seal and its own name, its assets and liabilities are separate and
distinct from those of its members. It is capable of owning property, incurring debt,
and borrowing money, employing people, having a bank account, entering into
contracts and suing and being sued separately.
6. Limited Liability:
The liability of the members of the company is limited to contribution to the assets
of the company upto the face value of shares held by him. A member is liable to
pay only the uncalled money due on shares held by him. If the assets of the firm
are not sufficient to pay the liabilities of the firm, the creditors can force the

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partners to make good the deficit from their personal assets. This cannot be done in
the case of a company once the members have paid all their dues towards the
shares held by them in the company.
8. Separate Property:
A company is a distinct legal entity. The company's property is its own. A member
cannot claim to be owner of the company's property during the existence of the
company.
9. Transferability of Shares:
Shares in a company are freely transferable, subject to certain conditions, such that
no share-holder is permanently or necessarily wedded to a company. When a
member transfers his shares to another person, the transferee steps into the shoes
of the transferor and acquires all the rights of the transferor in respect of those
shares.
11. Capacity to sue and being sued:
A company can sue or be sued in its own name as distinct from its members.
12.Separate Management:
A company is administered and managed by its managerial personnel i.e. the Board
of Directors. The shareholders are simply the holders of the shares in the company
and need not be necessarily the managers of the company.
13.One Share-One Vote:
The principle of voting in a company is one share-one vote i.e. if a person has 10
shares, he has 10 votes in the company. This is in direct distinction to the voting
principle of a co-operative society where the "One Member - One Vote" principle
applies i.e. irrespective of the number of shares held, one member has only one
vote.
ADVANTAGES:
1. .It can raise additional funds through the sale of stock.
2. Shareholders can easily transfer the ownership by selling their stock
3. Individual owner’ liability is limited to the value of stock they are holding i
n the Company.

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Disadvantages:
1. It is restricted by more regulations, more closely monitored by govern
mental agencies and are more costly to incorporate than other forms o
f the organizations.
2. Profit of the business is taxed by the corporate tax rate. Dividends pai
dto shareholders are not deductible from corporate income, so this
Part of in come is taxed twice as the share holders must declare
Divide ends as theirpersonal income and pay personal income taxes
too.
Examples: