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Lit1 Wgu Task a

In: Business and Management

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LIT1 Task 1 Part A (the report)

SOLE PROPRIETORSHIP: A sole proprietorship is the simplest, quickest and cheapest form of business to start making it the most popular types for first time business owners. A business owner and a sole proprietor may operate under different names, but legally, they are the same entity. Which leads to one of the biggest disadvantages of becoming a sole proprietor; the owner is responsible for all debts and fault created by the business. One of the major advantages to starting a sole proprietorship is the simplicity behind the formation. There is very little paperwork that needs to be filed at the inception and it takes very little work to keep the business compliant with state and federal laws. Another advantage to a sole proprietorship is taxes. Any money made by a sole proprietor is considered income to the owner. The profit is claimed as income on the owner’s annual tax filings. * Liability: Because there is no legal separation between an owner and the business in a sole proprietorship, the business owner is unlimitedly liable for any debt or fault of the business. Even if the sole proprietorship dissolves, the owner will be liable for the debt. If the debt is not taken care of in a timely manner it will could affect the owner’s credit rating and lead to future earnings being garnished. * Income Taxes: Taxation of a sole proprietorship happens once, at the income level of the owner. Any profit made by the company is considered an income to the owner. A sole proprietor is considered by the internal revenue service as self-employed, meaning the sole proprietor will not be held liable for FICA taxes. However, as the owner you will pay 100% of the self-employment tax (SECA). The annual contribution to the Self-Employment Contribution Act tax is deductible up to 50%. * Continuity: Because a sole proprietor is the…...

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