Before deciding how to organise their operation, prospective entrepreneurs need to identify the legal structure that will best suit the demands of their revenue. Three legal forms are the sole proprietorship, the partnership, and the corporation.
Sole proprietorship. A business is referred as such where it is owned and run by a single person or a couple. The owner fully controls the business and possess all assets. Similarly, the owner accounts for all liabilities. Most starting up small businesses use this form because of its easiness to start due to minimal paperwork. The individual who owns the business solely and flexibly makes decisions. Also, the owner wholly takes the returns. The form has its dark side too. The sole proprietorship is defined by an unlimited liability. Therefore, because the owners bears responsibility for all debts, his or her creditors may go against his business assets and property and assets, and personal assets. The reason behind this is that the owner and the business are recognized as one. The business is taxed on the basis of personal income. Such businesses have minimal chances of growth compared to the other two forms. Success or failure of the business is dependent on the owner. Lastly, deduction of taxes may not apply to this form.
The second form, partnership. A business is referred to as partnership whereby two or more people invest in the business and both profit from it. It has minimal paperwork and is easier to start just like the sole proprietorship. Partnership can either be general or limited. In the former, there is unlimited liability for the debts for the owner. In the latter, one or some partnered owners have unlimited liability while the liability of the limited owners is based on their investments in the business. More than one business owners are better placed than a single. There is high chances of business growth because of availability of more capital to invest in the business. However, conflicts among the partners are likely to occur. The profit is divided among the partners. The business has a limited lifetime because the partnership can be ended after the death of one of the partners.
The third form, corporation. Mostly, large businesses have the business form of corporations. A business in the form of corporation is lawfully regarded as an entity, thus, contrary to the two aforementioned forms, are apart from the people who own it. This implies that unlike where partners and a sole proprietor can be sued as persons, the corporation is as such: it can file a lawsuit against, a lawsuit can be filed against the corporation, it can acquire and sell its possession, and can trade the shareholders rights through stock exchange. A simple way to handle over ownership rights from one person to another, the owners are not answerable to the debts of the corporation, there is easy access to investment capital through stock exchange, the business lives even if its owners pass away. There is double-taxation for corporations, they are monitored by government regulators, and lastly, its hard to start, organize and manage such a business.
There are a number of schools of thought which view entrepreneurship from fundamentally different perspectives. In modern society, sociological perspective seems to take precedence. The following are the ways and examples through which the socio-cultural factors influence entrepreneurial behaviour.
One of the factors is religion. Religion greatly influences a society. This, it does by selling and reinforcing social norms and values to the society. It is through religiosity that the society’s people have similar beliefs. For example, some scholars, such as Max Weber, have a belief that the fatalism, asceticism (refrain from worldly pleasures), spiritualism and philosophy of India greatly hinders the material development of the nation. The scholars argue that this, coupled with the Karma doctrine of India, makes the citizen’s not be entrepreneurial.
The second factor is caste. Caste has a great influence on entrepreneurial especially to the societies that are defined by it. It obstructs other people from engaging in activities other than those that the society looks up to the to do. India offers a good example, whereby there are different castes: Shudra (farmers and laborers), Vaishya (traders and artisans), Brahmin (priests), Kshatriya (warriors) and Dalits (non caste). Except for the Vaishya caste and to a lesser extent the Dalits, the other castes would be very unlikely to engage in entrepreneurial activities because they are bound by their caste.
The other factor is family support. The way that a person is brought up by the family instils various norms and values in him or her. The upbringing, mould’s a person’s personality. For example, generally, female children in a family are not highly placed both financially and morally from a context of family support compared to male children, thus, in such circumstances, females have minimal chances of entrepreneurial success compared to their counterparts.
Lastly, is the level of education. Education acquired in learning institutions is crucial in determining whether the entrepreneur will succeed and to what degree. This is because through formal learning, technical skills, are passed on to the students which help them have an insight to look for entrepreneurial opportunities and how they can manage their businesses well to make the most of those opportunities. For example, compared to an uneducated entrepreneur, an educated entrepreneur has an insight of taking advantage of the media such as TV and social media like Facebook and Twitter, and can recognize the power of such platforms in reaching for a wider audience.