Running head: Business Law Rachel Lavender Western Governors University 2/21/11 PART A Sole Proprietorship A sole proprietorship is how most business entities begin. This type of business is owned and operated by one person. The main advantage of this type of business is that the owner does not need to get the approval of a partner or board in order to make decisions. A significant disadvantage is that, in a sole proprietorship, there is no separation from the business and personal assets, therefore, there is unlimited personal liability to the owner’s personal assets. · Liability-There is no difference between personal and business assets.
LIT1 Task 1 SOLE PROPRIETORSHIP: As the first word in the name suggests there is no distinction between the owner and the business, legally they are viewed as one entity. When it comes to starting a business this option is a perfect one because there is little to no start-up cost and autonomy since it is now your sole responsibility. The main disadvantage to this type of business is that financially the owner may find it hard to start up because any money that I loaned is a personal loan. • LIABILITY – The owner (proprietor) is liable for all debts and profits the business is and vice versa. The business and the owner are one entity so when the business owes on a debt the owner’s personal assets are liable to be taken as payment
The sole proprietor has the advantage of maintaining complete control over his or her business. Disadvantages: One of the greatest disadvantages to a sole proprietorship is the lack of cash flow or access to capital like loans or investors. They do not have the advantage of getting access to capital through bonds or shares and credit is based on their personal credit history. The lack of capital keeps purchase power restricted in comparison to corporations. Liabilities can be very heavy for sole proprietors depending on the nature of the business.
An individual is able to use his/her legal name for the business or come up with a different name as long as he/she files a d.b.a. for the name. (Lau, T, & Johnson, L., 2011) The below points of interests are of value in helping with a decision: • Liability – as a sole proprietor that individual is libel for all business expenses as well as coming up with the capital to start the business. This can be difficult if the business starts to fail since the creditors will be able to come after the individuals personal expenses to cover the debts (Smith, 2011). • Income Taxes – being a sole proprietor gives the individual the option to file taxes under a separate employer identification number.
General partners, organized as a Partnership, are fully responsible for liabilities while Limited partners are not. Sole Proprietors are 100% responsible for the liabilities of the organization. The Rights, Responsibilities, and Legal Arrangement among Owners are also a significant part of the decision making process when deciding the type of organization to form. “State corporation laws specify the rights and responsibilities of corporations and their shareholders. Consequently, shareholders have no flexibility to alter their legal treatment with respect to one another, with respect to the corporation, and with respect to outsiders” (15-3).
Disadvantages of the sole proprietorship include that the sole proprietor is held personally liable for the debts, and obligations of the business, all responsibilities for the business is at the discretion of the sole proprietor, and it is difficult to get investors. The sole proprietor is also responsible for the liabilities incurred by the employees ("The Basics of Sole Proprietorships,"
In Delaware however, no minimum capital is needed to incorporate, resulting in an inexpensive incorporation. In addition, the Delaware Corporate Dept provides a streamlined process to incorporate. The corporate officers never needs to step foot in the state and annual meetings can be held anywhere in the world. Unlike some states that require at least three people to fill official corporate roles, in Delaware, one person can be the officer, director and shareholding at the same time. But the major reasons for Delaware’s dominance in the incorporation of businesses, is due to the quality of Delaware’s courts and judges.
Firstly, limited liability business shareholders are not liable for the business debt. This means they don’t have pay using they personal possessions if the business goes busted. Tesco is a limited liability company. Secondly unlimited liabilities means the owner have to take full responsibility over the business this means they have to use their personal belongings to pay off
If no documents are forged, and if practices are properly approved and disclosed, appropriately accounted for, properly treated for tax purposes and in accordance with the terms of the option plan, most option granting practices should fall safely within the law (Rives, 2006). Legally as long as all of the paper work is met and the taxes are paid this is a perfectly legal process, however ethically it is illegal. A CEO has social responsibilities as well as responsibilities to his or her organization. For a CEO to profit when his or her corporation is in a slump or reporting tragic losses on its balance sheet, this is not a time for a CEO to be cashing in. This demonstrates poor judgment and poor faith in ones company.
The business owner or (if it’s a large business) a bookkeeper is in charge of recording all of the money going out (from sales) and all the money going out, such as expenses. If a business fails to achieve this they could find themselves not chasing payments, forgetting to pay bills or even worse, getting in trouble with HM Revenue and Customs (HMRC). When a business fails to record their transactions correctly it is impossible for them to publish their financial performance accurately and therefore tax payments may be wrong. Monitoring Activity There will be somebody within the business that will update the records on a regular basis and therefore will show a good indication on how the business is doing. The reason C&V would keep their records up to date is to ensure that they have received all of their payments from customers but also to ensure that they pay their suppliers.