Hammer Hardware is owned and managed by Harvey Hammer. As a small company, Hammer Hardware does not need access to large amounts of capital. Harvey is probably more interested in maintaining control of his company rather than having others invest in it. As a proprietorship, Harvey has total control of the business. All company profits belong to him. A primary disadvantage of the proprietorship is that Harvey is personally liable for all of the company’s obligations. He is responsible for paying the company’s debts, even if they require use of his personal resources.
Home Depot is a large corporation. To obtain the financial resources the company needs, it sells stock to a large number of investors. These investors expect a return from their investments but have no interest in managing the company. Instead, they hire professional managers to run the company for them. Corporations permit access to large amounts of capital. Also, individual owners are not responsible for the corporation’s debt, thus reducing the risk of ownership. A primary disadvantage of corporations is that owners have little access to information about the company. They depend on managers to run the business for the benefit of owners and to provide reliable information about their business activities.