Lit1 Task 1

My intention is to provide a description of each organizational form for the owner of a business, explains any major advantages or disadvantages, and then make an appropriate recommendation. Sole Proprietorship A sole proprietorship is an organizational form in which there is only one owner of the business and for all intents and purposes there is no legal difference between the owner and his business. While the owner has full responsibility for all losses and debts, he also receives all the profits. A major appeal of a Sole Proprietorship is the complete control of the business without having to answer to a board of directors, partner or supervisor. It is also the quickest and easiest form to set up, usually only requiring any necessarily permits and licensing to begin business. Incidentally, if the owner chose to, the business could also be just as simple to close for any reason. A major disadvantage would be that the owner would not only be responsible for independently securing startup capital, but he also would be solely responsible for any debts that the business incurs. Liability – Unfortunately, one of the biggest disadvantages is the amount of liability that would fall only on the owner. In addition to the financial responsibilities, if the owner suddenly passes away then the business ends as well. Carrying appropriate insurance policies would be necessary to protect the owner and his family. Income Taxes – Because there is no legal difference between the business and the owner, the owner will get to enjoy the simplicity of using a standard Form 1040 and Schedule C to declare income. Longevity or Continuity of the Organization – Aside from the owner suddenly passing away, it is their choice when to close the business and can easily do so at any time. Control – Another major advantage of a Sole Proprietorship is that the owner has control to operate the business as he sees fit. Whether he chooses to delegate responsibilities to employees or to do all the...