Business: Sole Proprietorship Essay

1316 words - 5 pages

Sole Proprietorship

A sole proprietorship is a business owned and controlled by a single individual. There are more sole proprietorships than any other type of business available (Lau, 2011). It is a simple type of business to set up, as well as simple to terminate. The proprietor has the freedom to determine operating hours, what services or goods to provide, where it operates, and what contracts to enter into without needed to consult another party. With full control, however, comes full liability. A proprietor is personally liable for all financial obligations whether they be debts from company operations or restitution ordered to be paid from third party suits. It can also be difficult to secure financing for a sole proprietorship as banks look at the business as an individual. Often, banks will treat loans to proprietorships as personal loans to the proprietor and require collateral.

Liability. All liability rests with the owner of the sole proprietorship. This can put the proprietor in a very difficult position if an individual were to sue the business. The courts consider the proprietor and proprietorship as one so when the business is sued, they are essentially suing the proprietor. All the proprietor’s personal assets such as their house, car, retirement account, and bank account are at risk. Debts the business is unable to cover must also transfer to the proprietor.
Income tax. The proprietor and their business are seen as a single individual by the government. As such, they are taxed together, once, as personal income tax. All profits gained through the sole proprietorship are direct income for the proprietor and are taxed as such. Any business expenses or losses can be deducted from their personal income total.
Longevity. While a proprietorship can be sold, it typically lives and dies with the proprietor. Other arrangements would need to be made ahead of time if the proprietor wishes the business to continue on without them. If the proprietor wishes to dissolve the company, they can do so by fulfilling any outstanding obligations the business has made.
Control. Ultimately, a sole proprietorship is controlled entirely by its creator. They may choose to hire an individual to manage their company, but the proprietor has final say in all decisions (Stevick Jr., 2006). No other individual may override the proprietor as long as they are operating within the law.
Profit Retention. All profits for a sole proprietorship are direct income for the proprietor with no profit sharing needed. Since no other individual can lay claim to the profits, the proprietor has the potential to regain their full initial investment quickly. The amount of profit earned depends entirely on the success of the business.
Location / Expansion. A proprietorship can be moved to another location without any permission and can change in any way the proprietor wishes within legal constraints. If the proprietorship wishes to operate in a new state, new...

Find Another Essay On Business: Sole Proprietorship

Business Forms: Proprietorships, Partnerships, and Corporations

1684 words - 7 pages three primary business structures which are used in the United States are sole proprietorships, partnerships, and corporations. The main differences between these three business forms are the tax accounting methods, the amount of liability which is imposed on the business owner(s), the number of owners which are involved with the company, and the amount of control that is given to the owner(s).A sole proprietorship, which is defined by having a

Business Proposal for a Retail Shop Selling Sports Clothing and Equipment

768 words - 3 pages business plan will have to be made after careful consideration, which will inform readers about the business, its name, location, aims and other important information. It will also hold some information about the business finance and what type of business it will be and what the business will do. The business will be a sole proprietorship, meaning that it will be controlled and managed by the sole trader. I have decided to

Business and company ownerships

1091 words - 4 pages The key differences that a lot of people notice among a sole proprietorship, a partnership, and a corporation is different things. A plan of action is needed to fulfill the goal of being your own boss and running a successful business. Success lies in the approach you choose to take. Once, you, the entrepreneur have determined the goods or services your new company will offer and whether there is a market for the product, a decision must be made

SWOTT Analysis Examines the internal ans external environmental forces and trends to consider when opening a business

1051 words - 4 pages SWOTT Analysis: Candy BusinessThis paper examines the internal and external environmental forces and trends to consider when opening a candy business. This paper will look at the legal and regulatory forces of a sole proprietorship and social external trends to consider. The internal forces and trends that will be analysis are strategy, structures, goals, culture, and leadership.Legal and regulatoryThis business is going to have a sole

Types of Business Organizations

2228 words - 9 pages genre and are separated by a pelxi glass partition. This aspect allows customers to feel as if they have stepped into a special bar and grill dedicated to the sole sport of choice while not being forced to only view that sport.Difference of Business Organizations TypesAs the venture of opening the Sunshine Sport's Bar and Grill gets underway, one major area of concern is whether the business should operate as a sole proprietorship, a partnership

Business Structure

1197 words - 5 pages according to the IRS is, Sole Proprietorship, Partnership, Corporation, S Corporation and Limited Liability Company. Each structure has advantages and disadvantages so that is why as a business owner, you should figure out which type of structure is right for you. When a business is structured as a Sole Proprietorship, more than likely there is just one owner. Sole Proprietorship are the most common and easiest types of formation since they are

An Explanation of Different Business Types

1277 words - 5 pages A sole proprietorship is a business that is solely ran by one person. “According to data from 2003, there were more than 17.5 million proprietorships operating in the U.S. and those generated $969 billion in revenues” (Hodgetts & Kuratko, 2008). Establishing a sole proprietorship is easy if an owner uses one’s own name or can use a trade name by filing with the city of business. Financial advantages to a sole proprietorship include all the

Influences of Business Environment

1334 words - 5 pages business that are affecting by those influences. Types of business may include sole proprietorship, partnership, limited partnership, corporation, limited liability partnership, limited liability company, c-corporation, and s-corporation. Riordan Manufacturing, Inc. is a global plastics manufacturer partnership that was founded in 1991. (Ecampus) The partnership makes it possible to raise more capital and to share ownership responsibilities. Like

The Roles of Different Types of Ownerships

1924 words - 8 pages A sole proprietorship is a type of business that is owned an operated by one individual. Legally, there is no difference between the owner and the individual. -Liability: There are no limits to liability with this form of business. All personal assets as well as assets obtained for business can be at risk. There is no protection of personal assets to repay damages or debts. -Income Taxes: As a sole proprietorship, the income flows

Entry Level Business Plan 1) Specialty high-end flooring contractor

1124 words - 4 pages claims and lawsuits from those with whom they will be doing business. A sole proprietor's personal assets such as the home, car and savings account might be "seized" to pay a business debt or judgment.This issue of personal liability for business obligations applies not only to the business operated as a sole proprietorship but to the general partnership and, to some extent, the limited partnership as well.The corporation, Limited Liability

The History and Role of Accounting in Business

1516 words - 6 pages proprietorship, the business will most likely have a hard time raising a capital, since the shares of the business cannot be sold, and sometimes it is more difficult for a bank to finance that company. Some businesses that are sole proprietorships in the U.S today include Xm satellite radio and Garmin navigation. Sole Proprietorships are comprised of 70% of the business organizations in the U.S. today. A partnership is owned by two or more people. A

Similar Essays

Legal Forms Of Business Essay

950 words - 4 pages should choose. As a legal form can have significant implications for your personal risk in the business as well as your potential for financial returns (Page 6 of 17 - How to Incorporate | (n.d.). Retrieved from The three different types of legal business forms are sole proprietorship, partnership and corporation. All of these have their advantages and disadvantages. Asking those questions

The Title Of The Essay Is "Business Ownership" The Question Was: Name The Three Different Types Of Business Ownership And Name The Advantages And Disadvantages Of Each Form.

1591 words - 6 pages Business OwnershipThere are three different forms of business ownership, the Sole Proprietorship, the Partnership, and the Corporation. Each of these businesses have major advantages and disadvantages.The sole proprietorship is a business which is owned and managed by one individual. Some of its advantages are, the ease of formation, its management control, and its distribution of profits. Some of the disadvantages are, its unlimited liability

Types Of Business Ownership Structures Essay

611 words - 3 pages There are four basic types of legal business ownership structures. These are sole proprietorship, general partnership, limited liability company, and corporation. This paper will outline the characteristics of each and provide an example for reference. A sole proprietorship is formed when one person owns and operates a business on his or her own and is relatively easy to start. (Shah, 2011) A sole proprietor can create their business by

Owning Your Own Business Essay

1007 words - 4 pages Owning Your Own Business There are many advantages and disadvantages when owning your own business. When you own you own business, it’s known as a sole proprietorship. But with any type of business, there will always be advantages and disadvantages. Five advantages for owning your own business are: 1) The owner receives all profits, meaning that all earnings go to the sole proprietor, or the owner, and isn’t shared with