wgu mgc1
Study Guide
11.1 Sole Proprietorships
Learning Objectives
1. Understand the importance of sole proprietorships in our economy.
2. Explore the advantages presented by doing business as a sole proprietorship.
3. Assess the disadvantages and dangers of doing business as a sole proprietorship.
Key Terms And Definitions
Angel Investors
Affluent individuals (or groups of individuals) who provide capital to start-up and early-stage businesses.
Entrepreneur
A person who organizes a business and carries the risk of loss and reward of profit with it.
Initial Public Offering (IPO)
The first time a corporation sells its shares to members of the public.
Private Placement
A nonpublic offering in which a business sells securities to a few chosen and qualified investors to raise capital.
Sole Proprietor
A type of business where there is no legal distinction between the business and its owner.
Unlimited Liability
An undesirable situation where if the debts of the business exceed its ability to pay, creditors may reach the personal assets of the business owners.
Venture Capital
Money invested in an unproven or new start-up business.
Key Takeaways
Sole proprietorships are the most common way of doing business in the United States. Legally, there is no difference or distinction between the owner and the business. The legal name of the business is the owner’s name, but owners may carry on business operations under a fictitious name by filing a d.b.a. filing. Sole proprietors enjoy ease of start-up, autonomy, and flexibility in managing their business operations. On the downside, they have to pay ordinary income tax on their business profits, cannot bring in partners, may have a hard time raising working capital, and have unlimited liability for business debts.
Exercises
1. Many household services professionals such as carpenters, plumbers, and electricians do business as sole proprietors. If they make a promise to their customers that their work (not the
11.1 Sole Proprietorships
Learning Objectives
1. Understand the importance of sole proprietorships in our economy.
2. Explore the advantages presented by doing business as a sole proprietorship.
3. Assess the disadvantages and dangers of doing business as a sole proprietorship.
Key Terms And Definitions
Angel Investors
Affluent individuals (or groups of individuals) who provide capital to start-up and early-stage businesses.
Entrepreneur
A person who organizes a business and carries the risk of loss and reward of profit with it.
Initial Public Offering (IPO)
The first time a corporation sells its shares to members of the public.
Private Placement
A nonpublic offering in which a business sells securities to a few chosen and qualified investors to raise capital.
Sole Proprietor
A type of business where there is no legal distinction between the business and its owner.
Unlimited Liability
An undesirable situation where if the debts of the business exceed its ability to pay, creditors may reach the personal assets of the business owners.
Venture Capital
Money invested in an unproven or new start-up business.
Key Takeaways
Sole proprietorships are the most common way of doing business in the United States. Legally, there is no difference or distinction between the owner and the business. The legal name of the business is the owner’s name, but owners may carry on business operations under a fictitious name by filing a d.b.a. filing. Sole proprietors enjoy ease of start-up, autonomy, and flexibility in managing their business operations. On the downside, they have to pay ordinary income tax on their business profits, cannot bring in partners, may have a hard time raising working capital, and have unlimited liability for business debts.
Exercises
1. Many household services professionals such as carpenters, plumbers, and electricians do business as sole proprietors. If they make a promise to their customers that their work (not the