LIT1 Task 1 - A
310.1.2: Organizational Forms
Task A
SOLE PROPRIETORSHIP: This is the most common form of business as it is owned by one person, so there is no distinction between the business and the owner.
Liability – Because there is no distinction between the business and the owner, all liability falls on the owner/sole proprietor. If the business fails, both personal and business worth and assets are at risk as they are the same.
Income Taxes – Filing for income taxes are an advantage as the owner and the business are taxed as a single unit. All income acquired through the business is treated as personal income to the owner, and there is no separate federal income tax.
Longevity – A sole proprietorship relies on its owner to continue on. If the owner dies, so does the business. Without proper planning such as creating a will or purchasing life insurance, the business has no chance of surviving without the owner.
Control – One of the biggest advantages is autonomy of the business. Without any bosses, partners or corporate rules, the owner has free reign of his or her own business.
Profit Retention – All the profits and benefits go to the one owner of the business and will not have to share with anyone else. The owner can also protect their income by reducing taxable income by noting certain things as “expenses.”
Convenience – Starting and carrying on a sole proprietorship is very convenient as it is quite simple. With limited legal requirements and financial obligations, the owner can easily start a business or end it on their own terms.
GENERAL PARTNERSHIP: This kind of partnership is where two or more people are equal owners and are equally active, liable and authoritative.
Liability – Each person has unlimited personal liability for the business. Like a sole proprietorship, any debt incurred by the business will have to be covered personally by the partners.
Income Taxes – With this kind of partnership federal income tax is not applied. However,
Task A
SOLE PROPRIETORSHIP: This is the most common form of business as it is owned by one person, so there is no distinction between the business and the owner.
Liability – Because there is no distinction between the business and the owner, all liability falls on the owner/sole proprietor. If the business fails, both personal and business worth and assets are at risk as they are the same.
Income Taxes – Filing for income taxes are an advantage as the owner and the business are taxed as a single unit. All income acquired through the business is treated as personal income to the owner, and there is no separate federal income tax.
Longevity – A sole proprietorship relies on its owner to continue on. If the owner dies, so does the business. Without proper planning such as creating a will or purchasing life insurance, the business has no chance of surviving without the owner.
Control – One of the biggest advantages is autonomy of the business. Without any bosses, partners or corporate rules, the owner has free reign of his or her own business.
Profit Retention – All the profits and benefits go to the one owner of the business and will not have to share with anyone else. The owner can also protect their income by reducing taxable income by noting certain things as “expenses.”
Convenience – Starting and carrying on a sole proprietorship is very convenient as it is quite simple. With limited legal requirements and financial obligations, the owner can easily start a business or end it on their own terms.
GENERAL PARTNERSHIP: This kind of partnership is where two or more people are equal owners and are equally active, liable and authoritative.
Liability – Each person has unlimited personal liability for the business. Like a sole proprietorship, any debt incurred by the business will have to be covered personally by the partners.
Income Taxes – With this kind of partnership federal income tax is not applied. However,