Sole Proprietorship

Examples of Sole Proprietorship in the following topics:

• Pros and Cons of Sole Proprietorship

  • The sole proprietorship structure has the benefit of simplicity and control but the drawback of unlimited liability.
  • The sole proprietorship is one type of business structure from a legal status perspective.
  • A large advantage of the sole proprietorship structure is its ease of filing incorporation and tax documents as well as having uninterrupted control of the business.
  • On the flip side, the sole proprietorship has one main disadvantage: there is no separation between the entrepreneur and the business.
  • The sole proprietorship is not a separate entity from the owner/entrepreneur, unlike a corporation.

• Disadvantages of Sole Proprietorships

  • Sole proprietorships face a number of difficulties in the longer terms compared to limited liability companies.
  • Sole proprietorships are the smallest form of business organization, and also the most common in the United States.
  • However, while there are certain advantages (it is easier to set up a sole proprietorship than a limited liability company, for instance), there are a number of big disadvantages, particularly in the long term, that make the sole proprietorship model quite unattractive to business owners.
  • Unlimited liability: Your small business, in the form of a sole proprietorship, is personally liable for all debts and actions of the company.
  • A sole proprietor will be responsible for all the costs and debts of their company.

• A Brief Definition of Sole Proprietorships

  • A sole proprietorship is owned and run by one individual who receives all profits and has unlimited responsibility for all losses and debts.
  • An example of a sole proprietorship is an individual who runs a local food truck and would be listed as such with the city.
  • A sole proprietorship, also known as the sole trader or simply a proprietorship, is a type of business entity that is owned and run by one individual and in which there is no legal distinction between the owner and the business.
  • It is a "sole" proprietorship in contrast with partnerships.
  • More than 75% of all United States businesses are sole proprietorships.

• Advantages of Sole Proprietorships

  • The advantages of a sole proprietorship versus other forms of organizations is the relative ease of set-up and the lower start-up costs.
  • As a sole proprietor, filing your taxes is generally easier than a corporation.
  • Sole proprietorships also have the least government rules and regulations affecting it.
  • Sole proprietorships also do not pay corporate taxes.
  • The sole proprietor can even pass the business down to their heir, a common practice.

• Types of Businesses

  • Primary ownership types of businesses include corporations, cooperatives, LLPs, LLCs, and sole proprietorships.
  • Primary ownership types of businesses include corporations, cooperatives, limited liability partnerships (LLPs), limited liability companies (LLCs) and sole proprietorships.
  • Sole proprietorship: A sole proprietorship is a business owned by one person for-profit, though the owner may hire and manage employees.

• Limited Liability Companies (LLCs)

  • An LLC is a hybrid business entity which has characteristics of both a corporation and a partnership, or sole proprietorship in some cases.
  • For tax purposes, an LLC can be registered as a partnership or sole proprietorship (and a corporation even though it is not a corporation for other purposes).
  • If you register your LLC as a sole proprietorship or a partnership, you will not have to pay federal taxes on your income.
  • For tax purposes, an LLC can be registered as a partnership or sole proprietorship (and even a corporation even though it is not a corporation for other purposes).
  • So if you register you LLC as a sole proprietorship or a partnership, you will not have to pay federal taxes on your income.

• Introduction to Small Business and the Corporation

  • Today, the American economy boasts a wide array of enterprises, ranging from one-person sole proprietorships to some of the world's largest corporations.
  • In 1995, there were 16.4 million non-farm, sole proprietorships, 1.6 million partnerships, and 4.5 million corporations in the United States -- a total of 22.5 million independent enterprises.

• Small-Business Structure

  • Most businesses are sole proprietorships -- that is, they are owned and operated by a single person.
  • In a sole proprietorship, the owner is entirely responsible for the business's success or failure.
  • Sole proprietorships have certain advantages over other forms of business organization.
  • And customers often are attracted to sole proprietorships, believing an individual who is accountable will do a good job.
  • A sole proprietorship legally ends when an owner dies or becomes incapacitated, although someone may inherit the assets and continue to operate the business.

• Corporate Taxes

  • A sole proprietorship is a business entity that is owned and run by a single individual.
  • There is no method for sheltering tax in a sole proprietorship.
  • For tax purposes, partnerships are treated similarly to a sole proprietorship - the owners pay tax on their "distributive share" of the business's taxable income.
  • Although vastly outnumbered by sole proprietorships and partnerships, most of the largest companies in the U.S. are C corporations.
  • An LLC, like an S corporation, is a hybrid entity having certain characteristics of both a corporation and a partnership or sole proprietorship.

• Forms of Business Organizations

  • This chapter defines and distinguishes the three business forms: proprietorships,partnerships, and corporations.
  • General Motors is in the business of making money. " All business owners seek profit, and we classify them as a sole proprietorship, partnership, and corporations.
  • Sole proprietorship is one person owns the business.
  • Sole proprietors are the most numerous businesses in the United States, and they usually own farms, grocery stores, hotels, and restaurants.
  • However, if a corporation continually earns losses year after year, then the business would fail, similarly to a proprietorship and partnership.