Lit1 Task 310.1.2-01-06
1
Part A
Sole Proprietorship
A sole proprietorship is a form of business that is owned by a single individual. • Liability – Due to the lack of legal distinction between the owner and the business, the owner is fully responsible and liable for all debts that the business incurs in the same manner that an individual is fully responsible and liable for all debts that they incur. There is no legal distinction between the assets of the owner of the sole proprietorship and the business; this means that creditors have the ability to come after the owner’s business and personal material assets. Income Taxes – Since the business is the same as the owner of the sole proprietorship, all profits or losses from the business are filed by the owner on their personal income taxes. All of the profits from the sole proprietorship will be taxed, except for deductions in the form of business expenses. Longevity / Continuity – There is no continuity of the business if the owner dies; the business simply ceases to exist. Control – A major advantage of using the sole proprietorship form of business is the fact that the owner of the business has full control of the business. Profit Retention – The owner of the Sole proprietorship retains all of the profits from the business. Unlike a corporation that is taxed twice, the owner of the sole proprietorship is taxed only at the individual tax rate. Due to this, the owner of the sole proprietorship is able to retain more of the profits. Location – If the owner of the sole proprietorship decides to move to another state, they simply need to register a new DBA (Doing Business As) in that state. Convenience / Burden – Sole proprietorships are not governed by the same regulations that corporations are faced with (i.e. annual meetings, state fees, annual reports, etc.) Sole proprietorships are an easy, inexpensive, and convenient way of doing business.
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General Partnership
A general partnership is an
Part A
Sole Proprietorship
A sole proprietorship is a form of business that is owned by a single individual. • Liability – Due to the lack of legal distinction between the owner and the business, the owner is fully responsible and liable for all debts that the business incurs in the same manner that an individual is fully responsible and liable for all debts that they incur. There is no legal distinction between the assets of the owner of the sole proprietorship and the business; this means that creditors have the ability to come after the owner’s business and personal material assets. Income Taxes – Since the business is the same as the owner of the sole proprietorship, all profits or losses from the business are filed by the owner on their personal income taxes. All of the profits from the sole proprietorship will be taxed, except for deductions in the form of business expenses. Longevity / Continuity – There is no continuity of the business if the owner dies; the business simply ceases to exist. Control – A major advantage of using the sole proprietorship form of business is the fact that the owner of the business has full control of the business. Profit Retention – The owner of the Sole proprietorship retains all of the profits from the business. Unlike a corporation that is taxed twice, the owner of the sole proprietorship is taxed only at the individual tax rate. Due to this, the owner of the sole proprietorship is able to retain more of the profits. Location – If the owner of the sole proprietorship decides to move to another state, they simply need to register a new DBA (Doing Business As) in that state. Convenience / Burden – Sole proprietorships are not governed by the same regulations that corporations are faced with (i.e. annual meetings, state fees, annual reports, etc.) Sole proprietorships are an easy, inexpensive, and convenient way of doing business.
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General Partnership
A general partnership is an