SOLE PROPRIETORSHIP:
Sole proprietorship is an independent business owned by one individual. Sole proprietorship businesses are relatively small and in most cases the financial resources of one person are adequate to cover operational expenditure.
Characteristics of Sole Proprietorship
1. Simplicity – Starting a sole proprietorship is quiet simple. The only legal formalities are applying for the required state or local license or permit. If the sole proprietor wants to operate the business under a different name other than his, then a special filling certificate is needed.
2. Control – The sole proprietor has unlimited powers and responsibilities. The destiny of the company ultimately depends on the owner and therefore makes all major decisions. Also the sole proprietor manages all major functions such as financial and sales.
3. Convenience – The sole proprietor is his own boss. He does not report to anybody when making company decisions. No third party or outside criticism/disapproval if wrong choices are made. No business charter from the state, or company regulations to regulate or reduce his authority. The sole proprietor can at his own will, expand the business operations, give it out on contract or outsource it. He can seize/ignore business opportunities, sell or liquidate the business or even relocate to another place.
4. Profit Retention – All profits of the business are personal income to the sole proprietor. There is no partnership to share profits, and there no shareholders to claim dividends. Other profit in the form of donations, gifts, etc.
5. Taxes – The sole proprietors and his business are taxed as a single-unit. There is no separate federal income tax reporting (pass-through taxation) and ...
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4. Profit – Limited Liability Companies have flexible distribution of profits. Unlike common partnership where profit is shared equally, LLC have much more flexibility.
5. Taxes – LLC can decide to be taxed as a sole proprietor, partnership, S-corporation or C-corporation, providing much flexibility and choices known as “check-the-box taxation”. Under the default tax classification, profit is taxed at the membership level and not at the LLC level (non-double taxation)
6. Liability – A LLC exist as a separate entity much like a corporation. Owners of a LLC, called “members” are protected from the liabilities and debts of the corporation and so cannot be held personally responsible unless they have signed a personal guarantee. On the other hand, LCC has a limited life, i.e. the company will be dissolved when it goes bankrupt or a member dies.
LLCs must typically pay more fees to file as LLCs compared to some other business entities or sole proprietorships. Additionally, many states require yearly renewal fees. However, these fees are usually less than what some other corporations have to pay. Because of the protections afforded to LLCs, some types of businesses are ineligible to file as LLCs. Banks, insurance companies, and medical service companies are examples of businesses that can not be a LLC. Another big disadvantage is taxes. Although LLC’s allow owners to avoid federal taxes, you may actually end up paying more than it would with a different corporation, depending upon the nature of the business. Working with an accountant and/or tax lawyer is a really good idea when planning your business and forming your LLC but can also be quite expensive. The LLC business form is a relatively new concept. As a result, not a lot of cases have been decided surrounding LLCs. Case law is important because of predictability. If you know a court has ruled a certain way, you can act in a specific way to protect yourself. But if not many laws have been established yet, there is a certain vulnerability with your corporations that could expose you to greater
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...
Limited companies are owned by shareholders. These are people who own shares in the company. Shares are the parts into which the value of the company is divided. So if a business is valued at £100 million and there are 200 million shares, each share will be worth 50 pence.
The limited partner only risks what they invested in the business. The downside is if the limited partner becomes active then they could potentially lose personal assets. The S corporation is a more favorable tax option on income. The disadvantage is there is certain requirement that must be met. The LLC is a great option. With this type, the risk is only what is invested unlike sole proprietorship. It is easy to set up, and has tax advantages. The downside is if a corporation wanted to switch to C, it would have to pay additional taxes. I do believe the option they picked is best for them at that time. C has tax advantages. If they started with LLC and later wanted to change, it would cost them. C is a great way to get capital as well.
A limited liability company agreement may provide that a member who fails to perform in accordance with, or to comply with the terms and conditions of, the limited liability company agreement shall be subject to specified penalties or specified consequences, and at the time or upon the happening of events specified in the limited liability company agreement, a member shall be subject to specified penalties or specified consequences (Washington State Legislative, 1994, sec 25.15.140). Let’s say a member of LLC read all the terms and conditions that is stated on the contract and then signed the contract. After a few days applying the rules that stated on the contract, the member violated one of the rules. The member must didn’t read that rule careful because he did the opposite of what the contract said. This allows the member the member to be punished for the action that was violated and the director had to let the member know the punishment. Unlike members, a limited liability company agreement may provide that a manager who fails to perform in accordance with, or to comply with the terms and conditions of, the limited liability company agreement shall be subject to specified penalties or specified consequences, and at the time or upon the happening of events specified in the limited liability company agreement, a manager shall be subject to specified penalties or specified consequences (Washington
The owner reports business gain or losses on his or her personal income tax return. A sole proprietor is taxed on all assets from the business at appropriate personal tax rates. The corporation income, and acceptable expenses, is reflected on the person’s tax return. All corporation income is taxed to the owner in the year the business acquire it, whether or not the owner take away the money from the business. No disconnect federal income tax return is acquired of the sole proprietor.
Being the owner of LSU, Joe probably operates as a sole proprietor. It is recommended that the business change its entity selection to limited liability company (LLC). The main advantages to an LLC are the protection the LLC owners receive from business creditors, and the fact that the owners can still participate in the management of the business.
The core company types offered nowadays is a sole proprietorship, partnership, limited liability company (LLC), and corporations. A sole proprietorship is a company with a singular proprietor that makes all key decisions for the company. A characteristic of a sole proprietorship is that owner is responsible for each and every liability of the company, and the company ceases to exist upon the death of the companys owner. The proprietor assumes all the hazards of the company, and all private assets are used for collateral, even if they are not used in day to day business activities. A partnership is an arrangement involving two or more parties that merge into one entity to pursue a company endeavor for revenue. Each affiliate contributes cash, assets, workforce, labor aptitudes, and each affiliate splits the revenues and debts of the company. Similarly, each affiliate accepts unrestricted personal accountability for the debts of the business. Limited partnerships reduce the amount of personal accountability each individual assumes for the liabilities of the company founded on the percentage each
Liability: Investors have limited liability. This protects investors from having litigation brought against them. If the investor is a managing partner, however they then could have their personal assets and property employed to satisfy any debt the S Corp has accrued.
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 proprietor businesses have a much higher likelihood of audit compared with a limited liability company. The Internal Revenue Service knows how easy it is to claim you have started a business and start trying to take unlawful deductions to lower your taxes. With a sole proprietorship, there is no state filing required- you can just call yourself a
Sole tradership is when the business is fully owned and managed by one person, though others can be employed to help run the business. As the sole traders only financial income is from the business and/or bank loan, they do not have the resources to expand and cover regional or national areas. These types of businesses are located in the small business sector and usually cover local areas. Such businesses could be hairdressers, corner shops or market stalls etc. Sole traderships have unlimited liability so if the business fails to pay its debts the financial responsibility falls on the owner/s to pay the debts in full even if they have to sell their business, personal possessions and assets.
Sole trader is a person that is self-employed . He or she runs the business on their own and has sole responsibility for its success or failure.
The profit is not split among partners, or split among corporations. So when you own your own business, you’re the first and only one that receives all earnings and profits. So if a person has a successful firm, he/she is the first to reap the success and rewards. 2) Another advantage of owning your own business is that you’re your own boss.