Essay About Sole Proprietorship And Form Of Business

Your Aquaculture Business
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Introduction
There are approximately 2.3
million farms in the United States,
ranging in size from small parttime
farms to very large operations.
Regardless of size, all farms
are a form of business and can be
organized or structured in several
ways. Individuals involved in the
business of fish farming need to be
aware of the various organizational
stuctures available to them,
including sole proprietorship,
partnerships (general and limited)
and corporations (regular and
subchapter-S). .
The specific circumstances of the
fish farm business dictate which of
these structures is most suitable.
For example, large farms with
numerous employees and a large
investment . requirement may find
it advantageous to consider a more
formalized structure, such as a
corporation. However, most farms –
are not in this category. In fact,
70% of the farms in the United
States fall at the lower end of the
income scale. This group is highly
dependent on non-farm income.
Overall net off-farm income has
increased from 10% in 1960 to 42%
in 1986. Nevertheless, these small
farms or operations may still
benefit from particular organizational
structures.
This paper reviews the various
forms of organizational structures
which can be utilized in fish
farming businesses and presents
the advantages and disadvantages
of each structure as they relate to
such businesses.
Organizational Structures
Sole Proprietorship
Most farms in the United States are
organized as sole proprietorships.
Under this structure the farmer is
the sole owner, has legal title to the
property, and is self employed.
Management decisions are solely
under the control of the farmer.
Resources for the operation are
limited to that available to the sole
proprietor. With this organizational
structure, personal and
business assets of the owner are
North Central Regional
Aquaculture Center
Publication No. 103
USDA grant # 88-38500-3885
June f992
jointly at risk in the operation.
Liability is not limited to only that
which is invested in the business.
The farmer has total liability for all
payments or actions, whether
incurred personally or through the
farm business. If aquaculturists are
sued for a farm accident, their
home and personal assets may
also be in jeopardy. This is a risky
situation for a farm business that
may be a part-time venture.
Especially, if a substantial amount
of personal assets are involved.
Sole proprietorship is the simplest
form of business organization as
far as start-up and record-keeping
are concerned, but it has its
disadvantages. Sole proprietorship
has been described as a hindrance
to estate planning, farm transfer,
and farm efficiency. However, if
the farm operation will cease upon
the death of the sole proprietor, it
is the simplest structure to liquidate.
Alternative organizational
structures should be considered if
“continuity of life” of the business
is a concern.
Farm efficiency varies with the age
of the sole proprietor. In the early
years of an operation, efficiency is
low, as assets are being accumulated.
Mid-way in the operation, as
the farmers net worth and risk
increase, the farm is at peak
operating efficiency. But as the
.years goon and retirement is
considered, the operator usually
becomes