Lit1 Task a

Topics: Corporation, Types of business entity, Partnership Pages: 5 (1400 words) Published: February 21, 2013
LIT1: Task 310.1.2-01-06
Task A

Sole proprietorship
1. Liability
* An owner has unlimited liability both personally and as the company owner. Liability is a disadvantage in a sole proprietorship. 2. Income taxes
* The owner is responsible for filing taxes and is allowed to file taxes as part of their personal income taxes. 3. Longevity
* This depends completely on the owner and there continued ability to operate the business. The operation of the business can be significantly affected if the owner becomes sick or dies. 4. Control

* The owner has complete control of the business. The owner is totally responsible for all decisions pertaining for business operations. 5. Profit retention
* The owner has 100% profit retention. They may choose to invest it back into the company or use it for something personal. 6. Location
* The owner has the ability to choose the location of the business or move it to a better location as they choose. 7. Convenience/burden
* Sole proprietorships are very convenient and easy to start up since there are no governing laws as there may be with a corporation. The burden of the business including decisions made that may affect the businesses success are the sole responsibility of the owner. General Partnership

1. Liability
* The liability is shared by all partners of the business. Also, if one partner does something negligent pertaining to the business, all partners can be held liable for the one partners act. 2. Income taxes

* The partners are each responsible to report their own earnings on their own tax return. This is the amount they received from the company as income. 3. Longevity
* This depends on the agreement between the partners. Often if one partner is unable to continue their role in running the business, they have the option of selling their share in the business to the other partner(s). If no agreement is in place the business would dissolve when one partner wanted out of the business. 4. Control

* The control is shared between the partners. This is most commonly detailed in a formal written legal agreement between the partners. 5. Profit retention
* The partners share the profit retention. This may be shared in any way the partners agree. Often this is based on the roles the partners have in the business. This is included in the partnership agreement. 6. Location

* The partners all have to agree on the location of the business unless this decision making power is given to one or more partners in the partnership agreement. 7. Convenience/burden
* General partnerships are easy to start up and operate. There is some added liability since there is more than one person involved. Also, conflicts are common between partners including one or more partners trying to remove a partner from the business entirely. Limited Partnership (not limited liability partnership)

1. Liability
* The liability is shared between partners. There is normally one general partner and one or more limited partners. The general partner assumes unlimited liability with the limited partner having no liability since they are considered mainly investors only. 2. Income taxes

* The taxes for the business are handled separately. The general partner files taxes for the business and the limited partners are only required to include the income they receive from the business every year on their personal tax return. 3. Longevity

* This depends on the general partners ability to run the business. The limited partner(s) have no affect on the business continuing. The limited partner has the ability to become the general partner as well but would lose their anonymity and would assume the liability that comes with being a general partner. 4. Control

* The control of the business is the responsibility of the general partner. The limited partner has to be careful not to assume responsibility for...
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