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One of the major disadvantages of a sole proprietorship is
Difference between sole proprietorship, partnership and corporation
Advantages And Disadvantages Of Sole Trader
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A sole proprietorship is a business that is solely ran by one person. “According to data from 2003, there were more than 17.5 million proprietorships operating in the U.S. and those generated $969 billion in revenues” (Hodgetts & Kuratko, 2008). Establishing a sole proprietorship is easy if an owner uses one’s own name or can use a trade name by filing with the city of business.
Financial advantages to a sole proprietorship include all the profits belong to the owner of the business minus taxes, social security and Medicare paid out. Some proprietors have higher credit ratings because both the business and personal assets stand behind them. Lack of restrictions and freedom to run your own business and for some may need to get licensing from the state. Having a sole proprietorship has secrecy on operation sales, financial strengths, and profit margins. Owing your own business brings a lot of personal satisfaction and the success of your business is the amount you contribute to.
Disadvantages to a sole proprietorship include unlimited liability and the debt incurred is the owner’s responsibility. “Creditors have a claim for these debts and can exercise it against both the business assets and personal assets of the proprietor” (Hodgetts & Kuratko, 2008). Since a business’s tend to be smaller for one owner the amount of capital is limited to be raised for operations. Most banks only lend 50% of the business value. Limited life of the proprietorship depends on the individual financial aspect, dies, goes to jail, or chooses to end the business presents risk.
“A partnership, as defined by the Uniform Partnership Act (UPA), is an association of two or more persons to carry on as co-owners of a business for profit” (Hodg...
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...ctivity include “not losing irreplaceable hours of your lifetime to meetings; avoiding the politics of a large and often cutthroat workplace, spending time with family or pets verse working for the business” (Coffey, 2008). A plan of attack would need to be put in place, work space should be divided, installing separate phone lines would help keep work and personal separate, whose home or all homes being used for the three proprietors, as well as insurance for all partners.
Works Cited
Coffey, L. T. (2008, October 1). Solo Act-Setting up a Home Based Business. Retrieved April 12, 2011, from www.today.msnbc.msn.com: http://today.msnbc.msn.com/id/26976151/ns/today-money/
Hodgetts, R. M., & Kuratko, D. F. (2008). Small Business Management. In R. M. Hodgetts, & D. F. Kuratko, Small Business Management (pp. 158,159,161,164,168,177). Hoboken: John Wiley & Sons.
Partnership – “A legal entity formed by two or more co-owners to operate a business for profit.” (Longenecker, Petty, Palich, Hoy, Pg. 202) In a partnership, the advantage for the owners is the capability to reduce the workload and the financial burden, especially if each partner has management skills that enhances the business. The disadvantages of a partnership such as personal conflicts and leadership expectations, therefore this organizational form should only be chosen once all other options have been considered.
Ebert Ronald J and Griffin Ricky W. (2011).Business Management.(8th edition). Business essentials, (pp.94-97), Boston [Mass]; London: Pearson.
I recommend that you transition from a sole proprietorship to a limited liability company or LLC. This will allow you to take advantage of certain favorable tax treatments, as well as personal liability protection, for the “members” involved. I will list some key areas where you will benefit from operating
A sole trader is a one man business. There is just one manager. Although they are the sole manager and owner they can employ staff to work for them. They can employ as many as they want to work for them. A sole trader is self employed, this means they work for themselves, they employed themselves, they for nobody. Sole traders trade with others. They may trade expertise, an example of this would be a business consultant taking on a big job and needing an extra hand just for that job, so this person may employ a person with the expertise he/she needs. Because a sole trader is the sole owner he/she keeps all the profits, unless he/she has any employees. The owner of the business makes all the decisions, he/she will not have anyone telling them what to do. When one wants to set up a sole trader business it is relatively easy. There is little paper work involved bec...
The court cited the Universal Partnership Act that defined a partnership as "the association of two or more persons, for the purpose of carrying on as co-owners a business for profit.
Exploring the Types of Business Organisations There are two Business Sectors: Public Sector These are businesses owned and run by the government. Some examples of Services provided in the public sector are the postal service, schools, colleges, housing environment, some bus and train services, fire, police, ambulance and local justice and social services. Their method of raising capital is different as Private Sector businesses have to raise their own capital e.g. their own money, a bank loan etc. The Public Sector business can get the money required from the Treasury or from local rates.
The largest being, that if you even want to start one, it requires and ridiculous amount of start-up. Another depressing fact is that corporations can get taxed twice. Once when they make a profit, and then when they split it. Last but not least this option is highly regulated and there is a seemingly endless amount of paperwork involved. On a lighter note, the disadvantages of an LLC are much more feasible. The biggest bummer about owning an LLC is that you have to pay a self-employment tax. But when you think about what the tax is for it makes sense. The other disadvantage is that the shelf life for an LLC is shorter than the other
There are many different types of business structures, but if you own and operate a business that it is a sole
A Sole Trader is a business that is owned by only 1 person. They are
Sole Proprietorship is one individual or married couple in business. Sole proprietorships are the most common form of business structure. This type of business is simple to form and operate and may enjoy greater flexibility of management, less legal regulation, and fewer taxes. Although this is the easiest form of business to start, "the income and losses are treated as personal and will be filed on a Schedule C along with the regular Form 1040 tax return" (IRS, 2004). If profits are minimal, the owner will be paying less in income taxes with this form of business than with a corporation. However, the business owner is personally liable for all debts incurred by the business. Sole proprietorships cannot take advantage of special business income tax rates since all income is considered individual income. In addition, sole proprietors are not protected from personal liability if they get into trouble with a client. If an upset client decides to sue, they sue the proprietor personally. If the proprietor must declare his company bankrupt, he files for bankruptcy personally. Moreover, by definition, a sole proprietorship can have only one owner, and that owner must be a "natural person" (i.e., not a corporation, trust, LLC, or other such entity.) Finally, one cannot sell or inherit a sole proprietorship.
There are over 28 million small locally owned businesses in the United States and 70 % of these businesses are owned and operated by a single person. Owning a small business is not an easy task it takes hard work and dedication, Steve Jobs once said “you need a lot of passion for what you’re doing because it’s so hard”, people don’t realize
The advantages of being a sole trader are, that the work that has been done is your work only, the profits are all yours and that you are self-employed (you are your own boss). The disadvantages of being a sole trader are that you may find you haven’t got enough money to start the business, pay for staff, equipment and stock, you may need help choosing locations, themes and styles and you would be likely to find yourself working harder and longer hours. Partnerships This is when two or more people join together to form a business. Partnerships usually have two to twenty partners. The advantage of being a partner is that the workload is split but so is the profit.
Pruett, M., & Winter, G. (2011). Why do entrepreneurs enter franchising and other share relationships?1. Journal of Small Business and Entrepreneurship, 24(4), 567-581,603-604. Retrieved from http://search.proquest.com/docview/923419785?accountid=39476
A small business can be defined as a legal entity consisting of very few employees. Establishing a business such as a proprietorship is the least complicated among business structures. Proprietorships also have a major advantage over other business structures with regards to filing taxes. Profits generated by the business are taxed at individual tax rates thus avoiding the double taxation incurred by corporations. Local economies, government offices, schools and the unemployed benefit greatly from the growth stimulated by these companies. The taxes collected from small businesses and job creation makes small business a vital part of the community.
There are many advantages and disadvantages when owning your own business. When you own you own business, it’s known as a sole proprietorship. But with any type of business, there will always be advantages and disadvantages.