Sole Proprietorship Sole proprietorship is the most common form of business in the United States. It is a relatively simple way for an individual to start a business since legal costs and business requirements are minimal, and the owner has complete control over the business. Though a sole proprietor is not responsible for any corporate tax payments, the owner is responsible for taxes incurred on the income generated from the business as part of his or her personal income tax payments, and personally shoulders any other risks or obligations. A sole proprietor may also choose to file their business under a fictitious business name or a DBA (doing business as), allowing him or her to operate and market the business under a more typical business name rather than their personal name. However, the business is not considered a separate entity and the sole proprietor is still personally liable for all obligations incurred by the business.
A sole proprietorship is a type of business that is owned an operated by one individual. Legally, there is no difference between the owner and the individual. -Liability: There are no limits to liability with this form of business. All personal assets as well as assets obtained for business can be at risk. There is no protection of personal assets to repay damages or debts.
The owner has the ability to grow or contact its operation at will with no need to consult with a boss or board of directors most sole proprietorships operate on a small scale, the main factor that distinguishes a sole proprietorship is the sole responsibility of ownership and decisions. DISCUSSION OF THE KEY CHARACTERISTICS 1.LIABILITY: There are no limits on liability with a sole proprietorship, the owner is responsible for all the businesses debts and obligations. The earning power of a sole proprietor can be limited due to lack of capital. The sole proprietor is only able to obtain personal credit to expand the company, the bank will not treat the company as its own entity 2.Income taxes:Income earned by the sole proprietorship is income earned by its owner and is taxed as such 3.Longevity: the sole proprietorship has a limited lifespan once the owner dies or moves on from the sole proprietorship will cease to exist 4.Sole proprietors have complete control over the decision making process. 5.The profits of the company do not have to be shared with anyone, the downside is the liability and loss are also not shared with anyone else.
• Convenience or Burden (Compliance): There are no requirements placed upon Sole Proprietorships in regards to financial reporting, or regulatory requirements. They can elect for DBA (Doing Business As) company, as clients, and mainly banks, may feel the company is more legit if it has unalike names as the proprietor. General Partnership: General Partnership is the business method in which there is more than one person agreeing to share all proceeds and losses of the business. • Liability: All general ... ... middle of paper ... ...y of the company. • Control: No single member of the company controls the company whether the members control it.
Sole Proprietorship: This a type of organizational form “where there is no legal distinction between the business and its owner”. ( ) Are easy to start, as well as relocate. There is complete autonomy over every aspect of the business and 100% of the profit is retained by the owner and only taxed once. Although there is often a high tax rate on the profit and the capitol needed to start or grow the business can only come from the sole owner or their personal means of credit. Because the business and the owner are legally the same entity there is unlimited liability to the owner to honor all contracts.
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.
I am able to run my business how I would like to, choose the hours I work and name my own prices for my services. Another advantage is the filing fee for a sole proprietorship is only $50.00. A sole proprietorship is the most common form of a business organization but it does have some disadvantages. The owner is held personally responsible for all debts and liabilities. I will need to buy insurance for my business that covers any miscalcu... ... middle of paper ... ...ber, you are not able to receive any benefits and neither will your employees.
Compliance: Sole proprietorships are that the owner is his or hers owns boss. They are not obligated by rules set forth by stockholders or managers. They run their business as they see fit. The disadvantage to this type of business is that if the owner makes a bad decision and has to shut down their business, any money owed to lenders must be paid in full and creditors can come after all their personal assets to pay off lenders. This includes cars, homes, a... ... middle of paper ... ...operate like a partnership.
TASK A The following are six forms of business organizations. Each form includes a description of the form and its key characteristics, advantages and disadvantages with respect to the following categories: Liability, Income taxes, Longevity, Control, Profit retention, Location (Expansion) and Convenience. (a1) SOLE PROPRIETORSHIP: An unincorporated business with a single person as an owner. Generally the sole proprietor acts as chief manager in all aspects of the business, but may employee others to run the business. Due to its single owner nature, agreements and formalities are not necessary.
It is not a legal entity; therefore, it cannot sue or be sued. Creditors must sue the owner and vice versa. There are no formalities necessary when creating a sole proprietorship. By simply not choosing another business form or structure, the person going into business by himself automatically creates a sole proprietorship by default. The business name simply needs to be registered with the state.