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 profits belong to the owner of the business minus taxes, social security and Medicare paid out. Some proprietors have higher credit ratings because both the business and personal assets stand behind them. Lack of restrictions and freedom to run your own business and for some may need to get licensing from the state. Having a sole proprietorship has secrecy on operation sales, financial strengths, and profit margins. Owing your own business brings a lot of personal satisfaction and the success of your business is the amount you contribute to.
Disadvantages to a sole proprietorship include unlimited liability and the debt incurred is the owner’s responsibility. “Creditors have a claim for these debts and can exercise it against both the business assets and personal assets of the proprietor” (Hodgetts & Kuratko, 2008). Since a business’s tend to be smaller for one owner the amount of capital is limited to be raised for operations. Most banks only lend 50% of the business value. Limited life of the proprietorship depends on the individual financial aspect, dies, goes to jail, or chooses to end the business presents risk.
“A partnership, as defined by the Uniform Partnership Act (UPA), is an association of two or more persons to carry on as co-owners of a business for profit” (Hodg...
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...ctivity include “not losing irreplaceable hours of your lifetime to meetings; avoiding the politics of a large and often cutthroat workplace, spending time with family or pets verse working for the business” (Coffey, 2008). A plan of attack would need to be put in place, work space should be divided, installing separate phone lines would help keep work and personal separate, whose home or all homes being used for the three proprietors, as well as insurance for all partners.
Works Cited
Coffey, L. T. (2008, October 1). Solo Act-Setting up a Home Based Business. Retrieved April 12, 2011, from www.today.msnbc.msn.com: http://today.msnbc.msn.com/id/26976151/ns/today-money/
Hodgetts, R. M., & Kuratko, D. F. (2008). Small Business Management. In R. M. Hodgetts, & D. F. Kuratko, Small Business Management (pp. 158,159,161,164,168,177). Hoboken: John Wiley & Sons.
Partnership – “A legal entity formed by two or more co-owners to operate a business for profit.” (Longenecker, Petty, Palich, Hoy, Pg. 202) In a partnership, the advantage for the owners is the capability to reduce the workload and the financial burden, especially if each partner has management skills that enhances the business. The disadvantages of a partnership such as personal conflicts and leadership expectations, therefore this organizational form should only be chosen once all other options have been considered.
Easy and inexpensive to form: Sole proprietorship is the simplest and least expensive business structure to organize. Costs are minimal, with legal costs limited to obtaining needed license or permits.
There are over 28 million small locally owned businesses in the United States and 70 % of these businesses are owned and operated by a single person. Owning a small business is not an easy task it takes hard work and dedication, Steve Jobs once said “you need a lot of passion for what you’re doing because it’s so hard”, people don’t realize
A sole proprietorship is a type of business that is owned and operated by one person who is responsible for all the debts. Forming the business is really easy to start off with. Also the owner receives all the profit from the business and is his or her own boss. The down side to owning a sole proprietor business of your own is it is really hard to find sources for funding the business for it to grow and expand. An example of a local proprietor business is Martha’s Kitchen. Martha’s kitchen is a really small restaurant on the outskirts of town. Martha chose to open a diner at her location because it is joined with a gas station and it is in a remarkable location for a restaurant business. Martha’s kitchen is open from 5:30 a.m. to 11:00 p.m. She serves the best peach cobbler around.
Sole Trader – This is a form of organization which is controlled by an individual. Sole trader form of business environment can extend up to family members depending upon size, personal control and other business needs. Sole proprietorship is flexible, easy to organize and manage. The biggest challenge for sole proprietorship is unlimited liability and risk of losing assets.
This form of business is similar to proprietorship in terms of formations of the business. Earnings are treated as the personal income among the partners regardless the money was taken out of the business or retained in the business. However, there are three important limitations in these two (proprietorship and partnership) business have.
I recommend that you transition from a sole proprietorship to a limited liability company or LLC. This will allow you to take advantage of certain favorable tax treatments, as well as personal liability protection, for the “members” involved. I will list some key areas where you will benefit from operating
A sole trader is a one man business. There is just one manager. Although they are the sole manager and owner they can employ staff to work for them. They can employ as many as they want to work for them. A sole trader is self employed, this means they work for themselves, they employed themselves, they for nobody. Sole traders trade with others. They may trade expertise, an example of this would be a business consultant taking on a big job and needing an extra hand just for that job, so this person may employ a person with the expertise he/she needs. Because a sole trader is the sole owner he/she keeps all the profits, unless he/she has any employees. The owner of the business makes all the decisions, he/she will not have anyone telling them what to do. When one wants to set up a sole trader business it is relatively easy. There is little paper work involved bec...
The most important characteristic of partnership is not to be recognised as a separate legal individual. Moreover, the partnership should be treated as a whole, that is, none of the partners should be separated from the whole entities (Maltas, 2011). The case of Cov v Hickman (1869) 8 H.L.E.R. 431 shows that each partner has the right to get paid and sufficient severally liable for the debts.
A sole proprietorship is a business entity formed by an individual, and are the most common and simple form of business structure. The owner is responsible for all of the control, liability, and management of the business. Although the business owner gets all the profits from the business, they are personally liable for all debts incurred by the business. Because the sole proprietorship is merely an extension of its owner, it has no life apart from its owner. It is not a legal entity; therefore, it cannot sue or be sued. Creditors must sue the owner and vice versa. There are no formalities necessary when creating a sole proprietorship. By simply not choosing another business form or structure, the person going into business by himself automatically creates a sole proprietorship by default. The business name simply needs to be registered with the state.
Some examples of sole proprietorship would be your local small coffee shop, bed & breakfast or even a dog groomer. The majority of the small mom & pop stores tend to be sole proprietorship whether it is a donut shop to a small mechanic shop. However, some disadvantages does include unlimited liability; being the sole owner you are responsible for all debt within the business. There is an immense amount of responsibility being the only owner of a company besides building capital for t...
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 anyone else. The profit is not split among partners, or split among a corporation. So when you own your own business, you’re the first and only one that receives all earnings and profit. So if a person has a successful firm, he/she is the first to reap the success and rewards. 2) Another advantage of owning your own business is that you’re your own boss. You can set your own hours, decide what you want to do with the company, no manager to answer to. Basically, you’re in charge of everything. The owner solely makes all decisions. Or in other words, you’re running the show. 3) An additional advantage is that a sole proprietorship can be easily organized. It’s easy to start your own business. First of all, it costs very little money to start your own business. As a sole proprietor, you have minimal legal requirements. The owner doesn’t have to establish a separate legal entity. All that is needed is to register the company with the state and apply for an occupational license and any additional licenses required for the state. ...
Limited Liability – The obvious advantage of a Limited Liability Company is the financial security that comes with the business. The Company’s shareholders will only be liable for any debt the company accrues according to the levels of their own investment and no more. This can provide a comfortable feeling of security for investors in the Company.
Pruett, M., & Winter, G. (2011). Why do entrepreneurs enter franchising and other share relationships?1. Journal of Small Business and Entrepreneurship, 24(4), 567-581,603-604. Retrieved from http://search.proquest.com/docview/923419785?accountid=39476
A small business can be defined as a legal entity consisting of very few employees. Establishing a business such as a proprietorship is the least complicated among business structures. Proprietorships also have a major advantage over other business structures with regards to filing taxes. Profits generated by the business are taxed at individual tax rates thus avoiding the double taxation incurred by corporations. Local economies, government offices, schools and the unemployed benefit greatly from the growth stimulated by these companies. The taxes collected from small businesses and job creation makes small business a vital part of the community.