Answer Limited resources may not be the best criteria for determining forms of ownership. If your proposed business carries little potential for extensive liability, such as a bookstore, I would suggest that a sole proprietorship or partnership may be a good way to start. If your business includes elements that may injure a customer, or cause some other serious liability to you, a corporation may be best. Sole Proprietorships are inexpensive to form, totally independent, enjoy single taxation-and the owner makes all of the decisions and keeps all of the profits. A number of the disadvantages of a proprietorship can be overcome by forming a partnership.
Partnerships enjoy a broader base of management expertise and increased financial resources.
However, with this form of ownership you give up exclusive rights to management and operating profits. Additionally, you incur the potential liability of the decisions of any one of the partners. Corporations can help to insulate small business owners from personal liability and may facilitate growth. As a legal entity, corporations act as an artificial person and can enter into contracts, buy and sell property, assume a name, sue and be sued, and borrow money. Drawbacks to incorporating a small business include higher taxation rates, extensive government regulation, public disclosure of finances and a higher cost of start-up and maintenance.