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MW 10:15 Business law

Business Formation Assignment (ch. 19&20)

Sole Proprietorship

What legal liability and protection comes with this form of ownership?

In a sole proprietorship the owner of the business has full liability for anything that happens within the business. The business isn’t its own entity therefore it all falls on the sole owner. Any issues, liabilities or losses that incur within the business are the owner’s responsibility.

How is this type of business formation typically financed? Do those involved in the financing take any legal risk (not financial risk) when providing that financing?

The funds for sole proprietorships can be quite limited. Luckily, it is the typically the cheapest business formation to start. Funds come from personal savings of the proprietor or close family and friends. The financing also can come from any banks or people willing to loan money. The people financing a sole proprietorship do not hold legal risk when providing financing.

What impact does this choice of formation have on the taxes for the owner(s)?

All profits the business receives are taxed as the owner’s personal income. This is an advantage to sole proprietorships because you don’t have to pay extra taxes for your business. The proprietor can also set up tax free retirement accounts until the funds are withdrawn.

What impact does this choice of formation have on the management for the owner(s)?

The owner of a Sole proprietorship has all control of the management. They choose who gets fired, how day to day operations are ran, when they want vacations, business direction etc. This is another advantage to a sole proprietorship.

General Partnership

What legal liability and protection comes with this form of ownership?

One of the major disadvantages is the legal liability in a partnership. The liability, as well as profits

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