Lit1 Task 310.1.2-01-06

2458 Words10 Pages
PART A (THE REPORT) SOLE PROPRIETORSHIP: A sole proprietorship is the simplest and most common form of business. It is a business run by an individual with no distinction between it and the owner. The owner is not only entitled to the profits, but is also responsible for its debts, losses and liabilities. * Liability: There is no legal separation between the owner and the business. The owner is held personally liable for any debts or obligations of the business and liabilities of any of its employees. Stock cannot be sold in the business and banks are hesitant to lend because of lack of credibility when it comes to repaying if the business fails, so raising money can be tough. * Income Taxes: The owner and the business are one in the same so the business is taxed collectively with the owner’s income. It is the responsibility of the owner to report income, losses and expenses in their personal tax form. * Longevity or continuity of the organization: The life of the business is limited to the life of the owner. When the owner dies, the business dies as well. If the sole proprietor authorizes someone to continue the business upon death, then the business can continue to operate. Heirs could also choose to continue the business as a new sole proprietorship or as another business form. * Control: Because there is only a single owner, a sole proprietor has control of all aspects of the business. The owner makes all of the decisions in how the business is to operate. * Profit retention: A sole proprietor keeps all profits of the business and does not have to share them with another individual. If the sole proprietor employs others, then it is the responsibility of the owner to pay the employees. * Location (expansion): Relocating to another state for a sole proprietorship is simple. The business needs to be registered with the new
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