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.
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).
A sole proprietor however does not necessarily have to run the business him, the owner can have others oversee and run the operations of the business just not as a partner, the owner is the overall decider of what will happen and will dictate the businesses future. This type of business form is the most widely used throughout the country, however it is not a form of business that is necessarily run with a large employee count. Rather it tends to be used with companies of one-person or a small number of employees. Advantages * Simple – start up is basically easy; the only legal item needed at first is state or local permits and licenses. If you want the business to have a name other then your given name you can file a request for that.
If they operate under a factious business name or sell goods or services requiring a license then the business files for licensing according to the nature of the business. This can be a sellers permit or a professional license. Advantages: Sole Proprietorships essentially have no formalities. Taxation is fairly simple, meaning that many of these businesses do not file separate business tax returns because they are not required to. The sole proprietor has the advantage of maintaining complete control over his or her business.
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• Income Taxes – being a sole proprietor gives the individual the option to file taxes under a separate employer identification number. The other option is to file their return normally and just fill out an IRS Schedule C to show profit or loss for the business (Smith, 2011). • Longevity/Continuity – One of the main issues of longevity in regards to sole proprietorship is that it dissolves when the owner dies so it makes it not possible to have continuity (Joseph, 2011). • Control – one of the great advantages of sole proprietorship that a person doesn’t have with a partnership or corporation is that you don’t have to answer to anyone but yourself in our decisions. You have
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
Corporations can choose either calendar year or fiscal year. It is not dependent on the tax years of the shareholders. Sole proprietorship and Partnership generally use the tax year of the owner. S-Corp typically has to use the calendar year, unless it can show the IRS why
Legal Forms of Business Law/531 November 7, 2011 Sole proprietorship This is the simplest form of business organization. A Sole proprietorship is a one person business, and the owner is the sole proprietor of the business. A Sole proprietorship is easy to establish and takes low cost to start, depending on the type of business. In this kind of business the sole proprietor owns and does all the management of the business and business
With a sole proprietorship, the owner pays taxes on the income from the business as part of his or her personal income tax. The company does not pay any business taxes. The owner can sell his or her business at any time and does not have to meet a timeframe for owning the business before selling. An owner of a sole