LIT1 – Task 310.1.2-01-06 Part A
SOLE PROPRIETORSHIP: A sole proprietorship is the easiest of all the business types to start and take the least amount of start-up capital. This is also the most common form of doing business in the United States. With a sole proprietorship, the business and the owner are one in the same and it is not possible to bring someone into the business.
Liability: The owner is responsible for the debt of the business. There is no differential made from the business to the owner. If the business is unable to pay, debtors can secure payment from the owner and their personal assets.
Income taxes: The owner is fully responsible for the taxes. The business does not file a tax return, the owner files on their personal income tax return. The owner would typically report the business income or loss using a Schedule C of the personal income tax return.
Longevity or continuity of the organization: Should the owner of the business die or decide to discontinue the business, it will simply no longer exist. The only thing the owner can do is leave the assets of the company to someone. Should the owner decide to discontinue the business
Control: The owner not only has control of the day to day operation of the business. They also have complete control of the business and can determine what changes or improvements need to be made based on customer feedback without the approval of anyone else.
Profit retention: The profits flow through to the owner, meaning the owner retains 100% of the profits from the business.
Location: The owner would have to file for a business license with the state that they wanted to expand to. The owner would also have to file additional paperwork to account for state income tax and possibly sales tax.
Convenience or burden: In order to start a sole proprietorship an owner would need to file for a business license in the state they are going to operate in. There is very limited expense for starting this type of business. With few regulations that require much work on the owner’s part it is easy to start a business of this type.
GENERAL PARTNERSHIP: A general partnership is an association of 2 or more individuals who share in the profits and losses of the company. The partners enter into a contract referred to as Articles of partnership. A general partnership is similar to a sole proprietorship.
Liability: With a general partnership each partner is 100% responsible for the liability of the company. Should the business be sued by a creditor, the court assumes that the responsibility is split fifty/fifty between the partners unless otherwise specified in the business agreement.
Income taxes: Each partner is fully responsible for the taxes. The business does not file a tax return, the partners file on their personal income tax return.
Longevity or continuity of the organization: In the event a partner chooses to the leave the company the partnership no longer exists. However, should the partner leave due to death and their portion of the business be willed to someone or simply choose to leave, the partnership would still cease to exist but could re-form either with the named heir or by purchasing the former partners interest.
Control: The control of the business in a general partnership is normally shared equally. However the Articles of partnership will determine how the business is controlled by the partners.
Profit retention: With a general partnership the profits flow through to the partners and distributed evenly. Again, the Articles of partnership will clearly state how the profits are to be dispersed to the owners.
Location: The partners would have to file for a business license with the state that they wanted to expand to. The owner would also have to file additional paperwork to account for state income tax and possibly sales tax.
Convenience or burden: In order to start a general...
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