Lit1 Task 310.1.2-01-06

2642 Words11 Pages
TASK 1 PART A SOLE PROPRIETORSHIP: A sole proprietorship is an organization in which the business is owned by a single individual. This is an easy organization to start, as the individual simply provides the goods or services, charges money, and begins doing business. The individual is also in charge of making all decisions involved with the business. In a sole proprietorship the owner and business are considered one, which can make it difficult to get the necessary funding as the owner must provide all personal financial statements. The owner is also held responsible for all legal and financial liabilities. Liability: In a sole proprietorship the owner is liable for all debts of the business. If the business assets are not enough to cover any debt creditors can come after the owners personal assets. Income taxes: In a sole proprietorship the owner claims the business income on his or her personal tax form only. The business is not required to file taxes, as the business and owner are considered one. Longevity or continuity: In a sole proprietorship should the owner die the business will typically lose their value. The owner can leave their business to an heir in their will, however there are many tax problems that can arise if the estate is not planned correctly. Control: In a sole proprietorship the owner is the person who has registered the business. This individual is in charge of managing the business, and has all control and makes all decision concerning the business. Profit retention: In a sole proprietorship any profits made belong solely to the owner because the owner and business are one. Expansion/location: In a sole proprietorship if the business chooses to expand to another state most states simply require the business to register with a state government agency, such as the state tax commission or department of commerce.

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