Sole Proprietorship: Task One

1998 Words8 Pages
| LIT 1 Task 310.1.2-01-06| By: Bryan Luttman| | 12/01/2012| LIT 1 Task 1 Part A Sole Proprietorship - It is a business that identifies itself with the owners name or a fictitious name. It also names the owner responsible for its debts. A sole proprietorship is not a legal entity and is the simplest form of under which a business can operate. The sole proprietorship is the easiest and most popular form of business for small business owners. The owner does not need to register his or her name and get a local license in order to do business, unless it is under a fictitious name. A sole proprietorship has the most freedom out of all the business types. Often times the owner will take checks in his or her name and possibly even comingle…show more content…
The partners should be of like mind and have a contract that states the percentage of profits, losses, debts and day to day duties that each partner is responsible for. The contract should also state what happens if one of the partners dies or retires. In a partnership you are legally responsible for your partner's actions and can be held labile for these actions. Partnerships report their earnings, losses and deduction for the business operations, but the business itself doesn't pay taxes. The business "passes through" it's earnings or losses to its partners. All partners pay their prospective share of taxes individually. Partnerships longevity can be short due to the limited availability to funding. Additional funding to a partnership comes from the personal assets of each partner. When partners can't get along and suffer from disagreements the business suffers. This can contribute to the businesses inability to stay together as a cohesive organization. Control of the business is in the hands of each of the partners and percentage of control is stated in the contract agreement at the start of the business. All partners have equal voting right regardless of how much money the contributed to the business. Partnerships, like sole proprietorships, can do business in other states…show more content…
Like the partnerships the S-corporations basically have no federal income taxes. S-corporations owners are taxed on their portion of earnings. The popularity of S-corporations fluctuate with the income tax law. Sometimes the corporation taxes are more than the individual and vice versa. Some of the similarities to a closely held corporation is each shareholder's liability is limited to the amount of their investment. There is also a limited supply of shares for the market, which make these shares less desirable to the market. The legal limit of shares in a S-corporation is 100 shares and in a C-corporation it is unlimited. S-corporations cannot sale their shares on the foreign market since foreigners don't pay individual income taxes. Shareholders vote to becoming a s-corporation and one or more shareholder holding 50 percent or more of the shares can revoke becoming a s-corporation. A Corporation can lose their S status by either having an ineligible shareholder or by having over 100 shareholders. Most corporations are governed by a board of directors with specific authorities. The longevity of an S-corporation is good due to the ease of transfer of shares. The shares can be endorsed and transferred at will without permission. All losses and earnings are passed through to the shareholders and the shareholders are the ones that are taxed, not the corporation. There are three

More about Sole Proprietorship: Task One

Open Document