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Business: What Is A Sole Proprietorship?

1038 words - 5 pages

A sole proprietorship is a business owned by one person. This is the simplest type of business to start and is the least regulated form of organization. A sole priprietor performs most of the major tasks and functions such as overall manager, sales manager, and finance manager. The owner not only retains the revenue and title to all of the business’s assets, such as profits, but is also responsible for all losses, debts, and aliabilites incurred. Although a sole proprietorship must comply with all required licenses and permits necessary for its type of business to operate legally, there is no legal requirment to start the business operation. Since the proprietor is the sole owner of the ...view middle of the document...

There are two basic types of partnerships: general partnerships and limited partnerships. A general partnership (the usual choice) is where each partner is fully active in the firm with a voice in its management. Each is an agent in the other partner(s) with full authority to act for the firm within the scope of its business. Each is fully liable for the debts of the business, each shares the profits, and has unlimited liability. A limited partnership is where there must be at least one general partner and one limited partner. The limited partner is not legally liable for the financial obligations of the firm. This partners liability is limited to the amount of his/her investment in the business. A limited partner can not be active in the management in the firm and have no involvement in the daily running of the business. Essentially, a limited partner is mostly an investor in the firm. When forming a partnership, the oral/written agreement indicates the terms that on which the partners agree on. Although there is no legal requirement making a written agreement necessary (except for Statute of Fraud purposes), it is in a partnerships best interest to have a written agreement for reasons such as it will enforce stable rules governing how the partnership will be run and what shall happen when it is dissolved, what will be done if one of the partners dies, and establish the full protection of each partner. Most businesses require specific articles of partnership to be included in the written agreement. These articles of partnership are names of the partners, name of partnership(which may not have a name copied from another firm and must be registered), nature of the business to be conducted, capital and property of the firm, capital contribution of each partner, share of each partner in the profits and losses, provisions for settling differences, drawing account arrangments, and the duration of the partnership....

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