...LIT1 Task 310.1.2-01-06 PART A Sole Proprietorship - This is considered one of the most common forms of business in America. There are advantages and disadvantages in being a sole proprietor. An advantage would be that you, as the sole proprietor, are your own boss. In contrast a large disadvantage would be that you, as the sole proprietor, are completely liable for every aspect of the business. * Liability: Sole proprietorships have what is considered to be one of the biggest risks when it comes to liability in that they have unlimited liability. Unlimited liability means the sole proprietor is ultimately responsible if the business fails, this would include debts. * Income taxes: legally there is no dissimilarity in the proprietor and the business, so all the organizations income is taxed as if the owner were working like an ordinary person. * Continuity of the organization: Sole Proprietorships will only last as long as the owner is alive. If the owner dies so does the business, so any employees that the owner had would be left to find other means of employment. * Control: Control of a sole proprietorship lies solely in the owner’s hands, he/she has complete discretion of what direction the business will go or even if the business will continue or not. * Profit retention: The profits from the business go completely to the owner, and would not be shared with any employees. However, this also ties to the financial aspect of the business. If there...
Words: 2103 - Pages: 9
...LIT1 – task 310.1.2-01 through 310.1.2-06 Business Forms Sole Proprietorship – Sole proprietors are individuals doing business on their own. They have no partners or shareholders. A sole proprietor may have a free-standing business where he works or he may be a contractor or freelancer and travel as near or far as he pleases. If he chooses to move to another location or State, he can continue his business there. Some advantages to this type of business are that the sole proprietor makes all business decisions, has creative control and keeps all of the profits (or can reinvest them). He also saves the expense of creating a partnership or corporation. There are no forms to fill out if you are a sole proprietor: you decide to start a business and you do it. There is no legal obligation to become incorporated. Another advantage is that there are no special tax forms to fill out; the sole proprietor fills out a standard IRS 1040 form and includes his business earnings as Schedule C. Disadvantages that may come up in a sole proprietorship include not having enough capital to start or continue the Sole Proprietorship or not having the time to spend with friends and family due to a heavy workload. If the sole proprietor has employees, he may have difficulty retaining them due to the benefits offered by corporations that may be nearby. The sole proprietor is also the sole person responsible in the case of a lawsuit and is personally liable for any debt. A large court judgment...
Words: 2386 - Pages: 10
...REPORT SOLE PROPRIETORSHIP: • LIABILITY – All debits are the responsibility of the sole proprietor. There is no limit of liability for the owner. This includes the owner’s house and all personal property. • INCOME TAXES – All income earned by the business is recognized as personal income by the owner. There is no legal difference between the owner and the business. • LONGEVITY/CONTINUITY – The business fails to exist if the owner dies, or quits. • CONTROL – The owner is the business; the business and the owner are the same. There is only one owner. Sole proprietors have full autonomy of the business (Forms of Business Organization, n.d.). • PROFIT RETENTION – If the business makes a profit, that money belongs solely to the owner. The owner can do anything with the money. • LOCATION – This entity is set up under the owners name but the owner may elect to use a fictitious name known as a dba (doing business as) business. If the business moves to another state, they simply move and register to do business in the new location. • CONVENIENCE/BURDEN – Owners of sole proprietorships have the flexibility in managing their business. This form of entity allows the owner autonomy to set their own hours, grow at their own pace, expand the business, or take a vacation all at their own discretion. At the same time, they also have the entire burden of the company. GENERAL PARTNERSHIP: • LIABILITY – Every partner in the partnership is jointly liable for the partnership’s debts and obligations...
Words: 2406 - Pages: 10
...PART A (the report) Sole Proprietorship: is an unincorporated business that is owned by one person, the sole proprietor. An advantage of a sole proprietorship is that there are very few formal requirements for the creation, operation, and termination of the business. The sole proprietor may employ as much or as little capital as he or she sees fit and run the business as they so desire. Additionally all the profits are those of the sole proprietor. With that stated, the losses are also those of the sole proprietor. Since there is no separation in the legal entity between the proprietor and the business, all personal assets become attached to the debt of the business. Another disadvantage can come at the time, or untimely of death of the proprietor. There is no automatic continuation of the business. The business becomes part of the owner’s estate and can become subject to probate and “death tax”. • Liability- You risk everything, there is no legal separation between the business and the individual owner. The owner risks all assets, home, car, everything in his/her name. Unlike a corporation, sole proprietorships have unlimited liability and the proprietor is legally responsible for all debts. • Income Taxes- All business related income or losses must be reported on the owner’s personal income tax return. The business is not separately taxed. Deductions are allowed for business expenses in the same manner as any other type of business. The...
Words: 3037 - Pages: 13
...Part A The Report Sole Proprietorship This is the most common form of business. The business and the owner are the same. That means all debts and liabilities are the responsibility of the owner. The advantage of this form of business is that it is so easy to start. Basically, you just start selling stuff or providing a service. Of course, if permits or special licenses are needed, you still have to get those. The disadvantage is that you can't bring in a partner because there can only be one owner. Liability: The owner is personally liable for all losses, debts, and liabilities. Income taxes: There is no difference between the business owner and the business, all income earned by the business is the same as personal income to the owner. Longevity or continuity of the organization: Duration of the business is dependent on the owner. If the owner becomes dies or becomes incapacitated, the business will normally cease to exist. Control: The owner has complete control over all decisions regarding the business. Profit retention: All profits and losses pass through to the owner and are taxed only once at the individual tax rate which enable them to keep more of the profits. Location: A sole proprietorship is easily expanded or moved to another state. A DBA needs to be registered in each state, along with filing taxes in each state if required. Convenience or burden: No permission from anyone is needed to form a sole proprietorship. There are no extra tax forms...
Words: 1635 - Pages: 7
...Part A (The Report) Sole Proprietorship A sole proprietorship is the most common form of forming a business in the United States. The individual that forms the sole proprietorship and the business is one in the same. For example, if the business owes creditors money, the individual who created the sole proprietorship business has to pay the bill. When entering into contracts the individual is actually agreeing to the contract since the person and business is one in the same. The biggest advantage of doing business under a sole proprietorship is that it is extremely easy to form since the individual creating the sole proprietorship is the business. They are fully responsible for all aspects of the business including making good on payments, collecting monies from customers, and providing the goods or services to their clients. Another reason individuals create sole proprietorships is the flexibility they gain by owning their own business. Since they do not have anybody to report to they can do as they please as far as hours, vacations, expansion, or direction of the business. However, there are many disadvantages that come with a sole proprietorship business. Since the individual is the business they are responsible for all financial responsibilities. They are responsible for ensuring all payments to creditors are paid on-time and in full. If the individual runs into financial issues they are responsible without protection. Also, sole proprietorships can only have one owner...
Words: 3869 - Pages: 16
...1) A Sole Proprietorship is: A. Easy to create, allowing sole proprietors to start their business. B. Able to allow sole proprietors to allocate profits from the company. C. Able to control all aspect of their business, from the company's location and financials to sales and marketing. D. Not required to file taxes, passing the company's profits and losses to their personal income tax return. E. Not required to file dissolution documents with the state in order to dissolve the company. F. Solely owned and proprietors and do not share profits from their businesses. Profit retention allows sole proprietors to use their money as they please. G. An Unlimited Liability because if it fails, creditors can go after both their personal and business assets. They can also be held personally liable for any injuries or property damage incurred by a customer while on their premises. 2) A General Partnership is: A. Liable for all of the partnership debts. B. Is easy to create, allowing partners to start a business quickly. C. Flexible as the partners govern the business in whatever manner they see fit. D. Less expensive to maintain than a corporation. E. Tax friendly as partnerships are not subject to federal income tax on the income earned. F. A financial liability as partners can make investments from their personal finances and the investment is then owned by all partners. 3) A Limited Partnership Is: A. Able to take the...
Words: 1211 - Pages: 5
...To: Business Owner From: Justin Lugar Date: November 4, 2015 Subject: Business Form Recommendation It seem as though the you are looking for a couple distinct business characteristics for improving areas of concerns you have for your, so far, promising business venture. Since you are now operating in a sole proprietorship, which allows business and personal finances to be one in the same, one worry is not having enough liability coverage to protect your personal assets/finances in unforeseeable lawsuits. Another concern is the being able to raise enough investments in capital assets to be capable of expanding your business. Right now you are not being double taxed, meaning at the corporate level as well as the personal level. Since there is a sole proprietorship going on taxes are only taken out at the personal level, saving you, as the owner, a substantial amount of profit. It is likely that this is one benefit you would like to keep in order to maximize your earnings. Based on the type of business you are seeking to operate I would recommend changing from the sole proprietorship to a Limited Liability Company (LLC) and I will explain why. To sum up what Http://www.referenceforbusiness.com/small/inc-mail/limited-liability-company.com states, the LLC offers the members (owners) protection from business liabilities that might be incurred. This means that they are not personally liable for paying any of the company’s debts beyond what they have invested in the company....
Words: 905 - Pages: 4
...LIT1 Task 310.1.2-01-06 Part A: 1. Sole Proprietorship: a. Liability: The owner of sole proprietorship is responsible for all bills that involve the business from supplies to employees. Owner personal’s assets are attainable by creditors in case the sole proprietorship is unable to cover for the bills. b. Income Taxes: The owner would be considers as ordinary person income in which they are tax heavily. Sole proprietorship is unable to take advantage of the lower income tax rate. c. Longevity/Continuity: It is impossible for sole proprietorship to continue because once sole proprietorship is no longer alive the business will no longer exist. d. Control: The sole proprietorship is control of the business. For example the sole proprietorship set his/her schedule (opening and closing) of business. e. Profit Retention: Sole proprietorship retains on the profit from the business. He/She is able to do whatever with the profits. f. Location: The sole proprietorship chooses where the business will be run at. g. Convenience/Burden: The convenience of being a sole proprietorship is being able to control business. The burden of being a sole proprietorship is being responsible for all aspect of the business from liability to income taxes. 2. General partnership: h. Liability: General partnership is still responsible for all debts and obligations. Evan if one of the partner has misuse the...
Words: 527 - Pages: 3
...LIT1 Task 310.1.2-01-06 ! Different Types of Business Organizations! ! Sole Proprietorship. ! ! Sole proprietorships is one of the easiest types of business organization to sign up for. This unincorporated business only requires one person to have ownership. Convenience is why this form of organization is preferred, as this organization has the least amount of regulatory oversight. The single owner of the business is the one personally liable for the actions of the business. When filling your income tax any income from this business is done on your personal income tax forms. The government does not separate the business income from the individuals income, they are treated as one. The sole owner of this business has all control of the business. The owner retains all profits earned by the business. The biggest negative aspect to a sole proprietorship business is that when the owner dies the company dies. According to your location if you expand your business into another state you may have to file income taxes in that state.! General Partnership. ! General partnerships are companies where you can have more than one person in control of the business management. General partnerships can be established by basic written or oral contract outlining terms of the partnership. This agreement needs to addresses key responsibilities of the operation of the business, including names of partners, business name and type, capital investment of each partner, resulting...
Words: 874 - Pages: 4
...LIT1: Task 310.1.2-01-06 Part A: Sole Proprietorship: is the most common business structure. The business is not a separate entity from the proprietor which makes autonomous. Liability - if you enter into a sole proprietorship, you have unlimited liabilities associated with your business. You will be liable to the full extent of your assets for any business liabilities. Income taxes - as a sole proprietor, when you file taxes, you would file it under your own personal income taxes. Sole proprietor do not have anyone withholding their taxes. You do have to keep me in mind that as a sole proprietor you are responsible for budgeting you tax liabilities. Continuity of the organization - as a sole proprietor, when you die, the business dies. Control - as a sole proprietor, you have total control of the business. As the sole owner, you do not share any responsibilities with anyone else. Profit retention - as a sole proprietor, any profit made from the business would only be distributed to the sole owner. There are not partners associated with sole proprietorship. Expansion - as a sole proprietor, you have autonomy or flexibility with your business. Since sole proprietors are not seen as legally separated from their business, the ease of expansion is uncomplicated. Compliance - there are minimal reports you have to file with the government and there is no restrictions on the operations of your business. General Partnerships: is a partnership that is formed with two...
Words: 1827 - Pages: 8
...LEGAL ISSUES IN BUSINESS ORGANIZATIONS Legal Issues in Business Organizations Toya M. Smalls Student ID: 000295300 LIT1 Task 310.1.2-01-06 June 28, 2013 Legal Issues in Business Organizations A business can be organized in one of several ways and the form its owners choose will affect both the company’s and owners’ legal liability and income tax treatment. It is important that the business owner considers these different forms of business organizations: sole proprietorship, partnership, and corporations. Various legal structures are available to assist business owners with the organization of their business. These legal structures make provisions for the business’ liability, income taxes, continuity, control, profit retention, and regulatory requirements. Each organizational structure differs and possesses advantages and disadvantages. The first important decision that a business owner will make is selecting an organizational structure that will capitalize advantages and curtail disadvantages for their business. Legal Issues in Business Organizations Sole Proprietorship A sole proprietorship consists of one individual doing business and is the most common and simplest form of business to establish. · Liability: Sole proprietors have unlimited liability, which is a clear disadvantage. They are personally responsible for the obligations of the business, including the actions of employees representing the business. · Income Taxes: A sole...
Words: 2373 - Pages: 10
...Lit1 Task 310.1.2-01-06 Part A Determining whether to start or invest in a business endeavor and what kind of business endeavor to choose can be challenging. Through this report the numerous types of business organizations will be assessed. By the end of the report you should have a greater comprehension of the different choices available. * Sole Proprietorship: To start off it is essential to have a clear understanding of what sole proprietorship means. As the sole proprietor you are the owner and the operator of that business. In more detail, the sole proprietor manages everything including setting up the business. An attorney is only needed if the sole proprietor plans to report the name of the business under a name other than their own. In that instance they would need to register the business with the government. * Liability: A full understanding of all liability and where it falls is very important. All liability falls on the owner on the company. This means that not only all of the company’s assets but also the owner’s personal belongings possibly will be occupied in any scenario where the company fails. More specifically, in the event that the company flops because of unfortunate market settings, poor business policy or if there is an injury suffered implicated by company products. The liability falls on the owner of the company including all characteristics of the business and can be brought into any legal actions. * Income Taxes: As a sole proprietor...
Words: 2781 - Pages: 12
...Ashley T LIT1 Task 310.1.2-01-06 Part A Sole Proprietorship – As a sole proprietor, you are your own business entity. You own and run your company, which means you are in complete control and assume sole responsibility of all legal and financial matters. • LIABLITY – There is no differentiation between the business and the owner, as they are one in the same. Therefore the business/owner takes full accountability and has limitless liability for all gains and losses the business obtains. • INCOME TAXES – All business revenue and overhead are considered personal income and have to be reported as such to the IRS on taxes as they cannot be taxed separately. • LONGEVITY/CONTINUITY – The business is only in existence while the owner is actively running it. Should the owner retire or pass, the business ceases to exist. • CONTROL – Since the business has one sole owner, it cannot be passed on to another individual for control. • PROFIT RETENTION – The business/owner retains all revenue. • LOCATION – You are not restricted on where you can operate your business. Depending on the states you expand to, you will be required to register your business with the state agency so it is known who is liable for any incidences. However, if you decide to use your name as the company name, most states will not require any registration. You just need to check with the state agency for their policies. • CONVENIENCE/BURDEN – The business can be established just by doing business...
Words: 3366 - Pages: 14
