Sole Proprietorship

• LIABILITY – All liability rests in the sole proprietors shoulders. There is no hiding from liabilities of the company for the owner, nor is the business sheltered from liabilities of the proprietor. • INCOME TAXES – Since the owner and his/her business are one in the same, all income is then treated as personal income to the

Many believe that liability is a biggest issue in a general partnership than in a sole proprietorship. The owners of the company are still fully liable for any debts the company may accrue as well as the liability for any lawsuits that may be brought against the company. However, the bigger issue in a partnership is that now each partner can be liable for the other partner’s actions. If one partner is sued for malpractice, the other partner may suffer because of it.

LIABILITY – There is no separation between the individual and the business. As the owner and operator of a sole proprietorship, all of the profit and loss is the personal responsibility of the business owner creating unlimited liability.

A1a: The Sole Proprietorship is the most common business form in the U.S. It offers the advantages of no-cost, easy startup, and full owner/operator autonomy with regard to business decisions.

Sole Proprietorship: This is a type of business is where the business and the owner are one in

* Single Ownership - The single individual always owns sole proprietorship form of the business. The individual owns all assets and properties of the business and bears the risk of losing or gaining from the business.

Anytime you start up a business or you take over another company there are multiple things you must do to get started. One of the major things one must do is decide on what type of ownership you want. There are many different types of business ownerships out there, but some will benefit you more than others. In this paper you will be learning about the difference two types of business ownerships you can have. The main point of the paper is to help someone that’s going to become an owner of a business be able to do what’s best for not only them, but also what will be best for the business. Sole trader ship and partnership are the two best ownership because they will benefit the owner and business more by going by what the company stands for.

All profits belong to the owner of the business in addition to all debts, losses, and liabilities (Small Business Association). In order to form a sole proprietorship, a business owner must simply begin practicing their business. There are no legal or formal actions required to form a sole proprietorship (Malinak). In order to sustain, such a structure, one must obtain the correct licenses and permits. These are obtained by meeting legal requirements set by the state and local government for the applicable industry (Bloomsbury). When one is considering different business structures, they must also consider the taxation methods of the various structures, as these methods vary. In a sole proprietorship, the business is not taxed as a separate entity from the owner of the business as they are considered to be the same being (Small Business Association). Now that all of the information has been gathered on this structure, it is imperative to evaluate the advantages and the disadvantages of this model. The advantages of a sole proprietorship are simple and low-cost formation of the structure, complete control of business by sole owner, and low tax rates. Some disadvantages of a sole proprietorship would include complete personal liability and the difficulty of running a business as the lone owner and employee (Bloomsbury).

A second major issue is how Stan can provide the financial issues in order to purchase and maintain a waste disposal location while also running five transportation trucks. Since this is a sole proprietorship, Stan will have to introduce a contract with the bank to help provide the financials. The bank can demand certain terms and conditions were they will be profitable and have certain major influences in the business organization since they provide the loan for the startup of Stan’s business. However if the company becomes unsuccessful or faced with extra expenses and defaults on the contract from the bank, Stan will be faced with the financials that the business may hold. The bank has all rights to take all of the proprietor’s personal assets in order to satisfy the obligations of the debt. He will also have to sign a contract with other employees that he must higher to operate the trucks or work at the site. Sole proprietorship would claim Stan to be accountable for the actions of his employees. These are only a couple of issues that may arise from operating this business as a sole proprietorship.

Stan should have concerns about operating this business as a sole proprietorship, a sole proprietorship exists when a person carries on a business on their own, without adopting any other form

A proprietorship is the most basic business entity (Dewhurst, 2014), in which an owner receives all profits and is legally liable for the obligations related to the business. It is the easiest structure to set-up, register and maintain, and additional tax incomes are not legally separated from the person. Its biggest disadvantage is that the personal property of the owner are not legally protected in case of financial obligations or company debts (Pakroo, 2004).

“Liabilities are debts: money you owe. Every business carries some liabilities—for example, ongoing payments to suppliers, rent for your office, compensation to employees, or fees for contractors” (Mancuso, 2014). Added liabilities may result if a business is ravaged by a fire or flood or if the business owner(s) become the victim of a lawsuit—for example, a patron, client or customer decides to sue your company after hurting themselves on company property. It is the intent of this paper to examine the role and responsibility of liability in different types of businesses from sole proprietorships to

a) Under the corporation, the owners have limited liability. Therefore, the owners of the corporation are not personally liable for the company’s debts. Sole proprietorship; on the other hand, the business owners are personally responsible for the business debt if the business doesn’t generate enough money to cover expenses.

After the creation of a business plan, the next step to operating a business is the selection of an appropriate business structure. Different legal forms of business ownerships affect different managerial and financial factors from the business names to the tax obligations (Gregory, n.d.). The most common forms are sole proprietorship, partnership, cooperatives, and corporations. There are different types of corporations in the business world, but the two most general corporation types are S Corporation and Limited Liability Company (LLC) (Ferrell et al., 2013). The sole proprietorship is the easiest and most basic form of business ownership. It is owned and run by one individual, which is the proprietor. The individual is entitled to all profits and is responsible for all the business’s

Is the most common business type, where the business is operated and owned by a single individual. In this type of business, the sole proprietor provides capital, does not share profit or loss and runs the business alone. As such, the business and the owner are indistinguishable for tax and legal purposes (Dlabay, 2011). To differentiate this business from other business types, a sole proprietorship is discussed under the following characteristics.