Legal Entities and Sole Proprietorship

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Sole Proprietorship: Sole Proprietorship is a very common form of small business organization. Benefits include having complete and total control as to how the business is run, marketing, hours, as well as the immediate dissolution of the business. Disadvantages range from personal liability for the business. A sole proprietor is also held responsible for all taxes for the business as personal income.

Liability: A sole proprietor is held personally liable for any errors or damages caused by the business. The assets of the owner are at risk should the business be involved in a lawsuit. Income Taxes: In a sole proprietorship, the business owner is responsible for all income earned through the business, and must be reported as personal income. This means that while there are fewer tax forms and returns to be filed, the tax liability may be greater than other forms of business. Longevity/Continuity: In many ways, this is a very attractive attribute of a sole proprietorship. A sole proprietor is in complete control of not only the start, run, and dissolution of their business, but they also have the ability to pass the business along to their heirs with very little red tape. There is no need to file legal paperwork to dissolve the business; the owner can simply cease operations. Control: Much like longevity or continuity of the business, a sole proprietor has complete control over business operations. At his/her discretion they can make the decisions as they see fit, without requiring the approval or input of other parties. Profit Retention: In a sole proprietorship, the business owner retains 100% of the profits earned in the business. They must be reported to the IRS in terms of personal income; however they remain completely in control of profits earned. Location: In keeping with the pattern of a sole proprietorship, the location of the business id at the discretion of the owner. While they have the decision making capability, there is still an obligation...
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