Business Forms and Attributes
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Forms of Business Organizations and Their Attributes
2 Forms of Business Organizations And Their Attributes Sole Proprietorship A sole proprietorship is the easiest business organization to form because ownership consist of a single individual. The sole proprietor has ultimate control over the focus and direction of the entire business. This feature sets the sole proprietorship apart from all other business organizations. The advantages of a sole proprietorship are that the only paperwork the sole proprietor needs to be concerned with, when forming the business, is state and local permits, licenses, and any special certificates that might be needed. No other legal actions need to be taken for a sole proprietorship to be established, saving time and money. The disadvantages of a sole proprietorship are that the individual owner is personally liable for the activity of the business. The personal assets of the owner may be required to satisfy any outstanding debt. Credit can also be an issue, when it is time for the business to expand, because loans will be based solely on the credit worthiness of the owner. Lack of capital for sole proprietorships can actually limit the scope and opportunities for the business. The attributes of a sole proprietorship are: • Liability-The owner of a sole proprietorship assumes total liability for the organization. He is responsible for the assets along with the liabilities that may accrue over the life of the business. Nothing distinguishes the owner from the business itself. Income Tax-There is no double taxation of a sole proprietorship, like there can be with other forms of businesses. Any income of the owner and profits of the business are taxed together. Form 1040 and the Schedule C are used to tax the owner and the business as a unit. Good record keeping is a must to insure that personal income is separated from business income. Longevity or Continuity of the Organization-The greatest disadvantage of a sole
Forms of Business Organizations and Their Attributes
2 Forms of Business Organizations And Their Attributes Sole Proprietorship A sole proprietorship is the easiest business organization to form because ownership consist of a single individual. The sole proprietor has ultimate control over the focus and direction of the entire business. This feature sets the sole proprietorship apart from all other business organizations. The advantages of a sole proprietorship are that the only paperwork the sole proprietor needs to be concerned with, when forming the business, is state and local permits, licenses, and any special certificates that might be needed. No other legal actions need to be taken for a sole proprietorship to be established, saving time and money. The disadvantages of a sole proprietorship are that the individual owner is personally liable for the activity of the business. The personal assets of the owner may be required to satisfy any outstanding debt. Credit can also be an issue, when it is time for the business to expand, because loans will be based solely on the credit worthiness of the owner. Lack of capital for sole proprietorships can actually limit the scope and opportunities for the business. The attributes of a sole proprietorship are: • Liability-The owner of a sole proprietorship assumes total liability for the organization. He is responsible for the assets along with the liabilities that may accrue over the life of the business. Nothing distinguishes the owner from the business itself. Income Tax-There is no double taxation of a sole proprietorship, like there can be with other forms of businesses. Any income of the owner and profits of the business are taxed together. Form 1040 and the Schedule C are used to tax the owner and the business as a unit. Good record keeping is a must to insure that personal income is separated from business income. Longevity or Continuity of the Organization-The greatest disadvantage of a sole