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Lit1 Task1

In: Business and Management

Submitted By wplegge
Words 2742
Pages 11
LIT1 Task 1 Part A SOLE PROPRIETORSHIP: A business that is owned by one person and is not incorporated. Sole proprietorships are easy to start. You don’t need a lawyer and you don’t need to register with the government except to obtain a business license or permit where required. * Liability: The owner is liable for all debts incurred by the business. His personal property can be attached. He is also responsible for any damage an employee may cause while working for him.

* Income Taxes: The owner pays ordinary income tax on all profits. This can be an advantage because most of the time personal tax rates are lower than corporate rates. But, a sole proprietor will have to pay self-employment tax at a rate of 13.3% for the first $106,800 of income and 2.9% after that. The owner needs to register for an EIN (Employer Identification Number) if he will have employees. Payroll taxes need to be paid on employees. * Longevity/ Continuity: The business exists as long as it is financially solvent, the owner is alive, and the owner continues running the business. If the owner brings in another investor it becomes a partnership. * Control: The owner is solely responsible for all decisions concerning the management of the business. If they want to expand the business or end the business it's totally up to them. * Profit Retention: The owner keeps all profits and he also takes all losses. * Location: Different licenses or permits may be needed when moving to another state. Personal taxes vary from state to state. Some states have high taxes and some have no individual income tax. This will affect the total taxes paid on the business. * Convenience/ Burden: Special licenses or business permits may be needed. There is no need for any government approval of the business organization. All

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