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Lit1 310.1.2-01-06

In: Business and Management

Submitted By henry7304
Words 3092
Pages 13
Part A (the report)
SOLE PROPRIETORSHIP: This business entity is the most common business used in the United States. This entity is owned and ran by one individual where there is no legal distinction between the owner and the business. This legal name of the business is the owner’s name; however, the business may operate under a fictitious name by filing a DBA. This person is legally accountable for all elements of the business including finances, loans and debts. One of the advantages of doing business as a Sole Proprietorship is that it’s easy to create. Another key advantage is the autonomy. Since the owner or individual is the business, he or she may decide for themselves whatever business decision they feel is needed to make, including the business finances. Some disadvantages would be that it is impossible to bring in others to do business being there can only be one owner. This also makes it difficult to raise capital in terms of seeking investors. Tax planning can also be challenging for the sole proprietor. Since there is no legal distinction between the owner and the business, all the income generated by the business is treated as ordinary personal income to the owner.
• Liability: Sole Proprietors have unlimited liability. There is no difference between the owner and the business. Therefore, the owner is personally liable and responsible for all the business obligations and debt. Doing so makes all of the owner’s personal assets reachable to creditors.
• Income taxes: All of the sole proprietor’s business income is taxed as personal income to the owner. The Unites States offers many different tax rates based on one’s income. Typically, this person ends up being taxed at a higher rate.
• Longevity or continuity of the organization: When the owner dies, for the most part, the business dies as well. The executor of the business owner's estate manages...

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