Lit Task 310.1.2-01-06

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LIT Task 310.1.2-01-06 1. Sole Proprietorship- a type of business that is owned and operated by one person. There is no legal distinction between the business and its owner. A sole proprietorship is the simplest form of business. It is owned and operated by the same person. An owner of a sole proprietorship takes on all responsibilities and liabilities of the business. • Liability- A major disadvantage of a sole proprietorship is the liability. As a sole proprietorship business both the owner and business are subject to any debt unpaid. If the business has debt that is unpaid then the creditors could go after the individual. Same is also said if the owner has debts separate from the business debt the creditors could go after the business. As a sole proprietorship business, liability insurance could be purchased to deter this. • Income Taxes- As a sole proprietorship business, a person can avoid the higher taxes that are associated with corporations. A sole proprietorship business can also deduct business expenses just like any other business. The disadvantage is you will be taxed on total profits of the business which includes all income also. • Longevity/Continuity- The longevity of a sole proprietorship business is the life span of its owner unless the owner sells or hands down the business to a relative. • Control- The owner of the sole proprietorship business has complete control over every decision of the business. The disadvantage of this would be the lack of additional input from other shareholders could help in expanding or continuing the business. • Profit Retention- Any earnings made as a sole proprietorship is retained by the owner. The owner can determine how much to retain in the business funds and how much to take as personal use. • Convenience- A sole proprietorship is very simple to start.

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