Final answer:
Mike prefers a sole proprietorship for his horse farm due to the ease of management, complete control, and the retention of all profits. Sole proprietorships are simple to establish and allow for direct management, but come with the risk of unlimited liability.
Step-by-step explanation:
Mike believes the sole proprietorship is the best form of doing business on his horse farm. Sole proprietorships are the most common form of business organization and are characterized by being owned and operated by one person. This type of business structure allows the owner to maintain complete control over all business decisions and enjoy all the profits from successful management. It is straightforward to start a sole proprietorship, as it requires minimal bureaucratic hurdles and can operate without the need for formal incorporation.
The main advantages of a sole proprietorship include the ease of management and setup, along with the psychological satisfaction that comes with being one's own boss. Additionally, the owner does not have to deal with special business taxes but rather pays tax on the income generated by the business. However, it's important to consider the risks involved, as the owner bears unlimited liability for the debts and obligations of the company. This means that personal assets could be at risk if the business is not successful. Nevertheless, for individuals who want to independently manage a business, a sole proprietorship offers a feasible and potentially rewarding option.