Lit1 - Pt 1
Business and Management
Submitted By tashamarie429
Natasha Kelso – Submission of Task 1 – LIT1
SOLE PROPRIETORSHIP: A sole proprietorship is a business that is owned by one person. These businesses are relatively small to medium size and is not registered with the state as a corporation or a limited liability company. However, in order to be a legitimate money making operation, the business will have to be registered within the state it does business in. This can be a cumbersome process to say the least.
• Liability: A sole proprietor can be held personally liable for all business-related costs and obligations. The owner of the business is solely liable for all debts including start up fees, bank and loan fees and interest and other necessities needed to operate the business. This also means if debts cannot be paid or the business is sued in court, the owner is liable of coming up with the money, which also could resort to losing personal assets.
• Income taxes: Sole proprietors must pay their own personal and business taxes which are both filed on the personal income tax forms. The great thing about filing as a sole proprietary owner is most of the debts incurred for the business are tax right-offs.
• Longevity or continuity of the organization: When the owner dies, unfortunately the business will either end or be inherited by the person the owner left the business to in his or her will. And with that of course all debts will be inherited as well as profits.
• Control: The sole proprietor controls everything in the business. The owner assumes all responsibility and controls everything that happens in the business. Daily operations could be handled by someone who is hired by the owner of the business or could be done by themselves.
• Profit retention: All profits and proceeds go to the owner who then decides how to disburse the money back into the business or keep it for themselves. The greatest thing about sole proprietor businesses is that owner can choose to keep overhead at a bare minimum which will result in higher profits.
• Expansion / Location: As a result of expansion the business to multiple states, the owner will have to register the name as a DBA which means, “Doing Business As”. This also means creating an LLC (Limited Liability Company) which will have to be registered in the state the business will operate in, requiring you to file formation paperwork called articles of organization with a state business registrar to make the change. Sole proprietors who move from a state that charges an income tax to a state that doesn't charge an income tax may face significant changes in how they run the financial end of their businesses.
• Compliance / Convenience / Burden: The owner must make sure that the business complies with all reporting and regulatory requirements. All small business owners face insurance burden on top of legal compliance obligations that must be substantially upheld in order to remain compliant within the operating state.