FMAD 1110: Fashion Fundamentals Textbook: 4.1 Business Ownership

Business Ownership

In the fashion industry, there are different forms of business ownership such as a single owner (sole proprietorship), partnership (a few owners), and corporation (many owners). There are advantages and disadvantages to each type of business ownership.

For instance, a single owner has the advantage of keeping all profits, having flexibility in ownership by making own hours, pay, and more, and this type of business is simple to set up as well as close down. The disadvantages to single ownership is the burden of sole financial responsibility (high liability and limited capital). Also, lack of sufficient management and continuity within the business. For instance, the owner may also be the manager, buyer, visual merchandiser, etc. which can cause a strain on managing the business well.

Image Source: Black Woman Having Cell Phone Call in Mall

A partnership on the other hand has the advantage of a few people working together to maintain the business. This form of business ownership offers less challenges than running a corporation as it is easier to set up. In addition, this form of business ownership offers greater financial and management capabilities than a single ownership. However, there may be more interpersonal conflicts than a sole proprietorship along with being harder to dissolve or run consistently after an owner passes away. This form of ownership is similar to a sole proprietorship in that partnerships also have unlimited financial responsibility.

Corporations, due to having many owners, are in the unique position of having limited financial responsibility compared to other types of businesses. Thus, the entire financial responsibility of the company is different than being entirely on one person or a few owner partners. In addition, there can be more specialized management skills to run the business, greater financial gains, and the ease of ownership being transfer. On the other hand, corporations have the disadvantage of being difficult and costly to establish as well as dissolve (or shut down), having legal restrictions, being less personal, and having tax disadvantages.

Thinking Point: If you could own a fashion business (on any level such as primary, secondary, retail, or auxiliary), which type of business ownership would you choose and why?