Lit 1
LIT 1 Task 1
Sole Proprietorship
A sole proprietorship is the most common type of business in the United States. It is formed when a person starts a business, but does not register it as a corporation, or a limited liability company. Most contractors, consultants, and home businesses operate under this form of business. Sole proprietorships are easy to form, and provide the owner with total control over the business. All of the profits belong to the owner, because the business and the owner are one and the same. Taxes are easier with this type of business since all profits or losses are filed on the owners individual income taxes. The owner may operate the business under a fictitious name as long as the appropriate forms have been filed, and the initials d.b.a. is used. There are some serious disadvantages also. The owner is responsible for all of the liability, and has none of the common tax shelters that corporations do. Loans can be hard to obtain because banks view them as personal loans, and if the owner of a sole proprietorship dies, the business dies with them.
Liability: The owner has unlimited liability. If the business fails the owner is responsible for 100% of the debt, and may be sued. The owner’s personal property may be liquidated to pay for debt.
Income Taxes: Income taxes are generally easier to file with a sole proprietorship, since the profits or losses are filed on the owners individual income taxes. However, a sole proprietorship gets none of the common tax shelters that corporations enjoy.
Longevity or Continuity of the Organization: A sole proprietorship lasts until the owner dies, or no longer wishes to be in business. It cannot be sold or passed on to heirs.
Control: The owner has complete and total control in this type of business. All of the decisions involving the business are the owner’s responsibility.
Profit Retention: Any and all profit made by the business belongs to the
Sole Proprietorship
A sole proprietorship is the most common type of business in the United States. It is formed when a person starts a business, but does not register it as a corporation, or a limited liability company. Most contractors, consultants, and home businesses operate under this form of business. Sole proprietorships are easy to form, and provide the owner with total control over the business. All of the profits belong to the owner, because the business and the owner are one and the same. Taxes are easier with this type of business since all profits or losses are filed on the owners individual income taxes. The owner may operate the business under a fictitious name as long as the appropriate forms have been filed, and the initials d.b.a. is used. There are some serious disadvantages also. The owner is responsible for all of the liability, and has none of the common tax shelters that corporations do. Loans can be hard to obtain because banks view them as personal loans, and if the owner of a sole proprietorship dies, the business dies with them.
Liability: The owner has unlimited liability. If the business fails the owner is responsible for 100% of the debt, and may be sued. The owner’s personal property may be liquidated to pay for debt.
Income Taxes: Income taxes are generally easier to file with a sole proprietorship, since the profits or losses are filed on the owners individual income taxes. However, a sole proprietorship gets none of the common tax shelters that corporations enjoy.
Longevity or Continuity of the Organization: A sole proprietorship lasts until the owner dies, or no longer wishes to be in business. It cannot be sold or passed on to heirs.
Control: The owner has complete and total control in this type of business. All of the decisions involving the business are the owner’s responsibility.
Profit Retention: Any and all profit made by the business belongs to the