Lit1 Task 1

Part A

Sole Proprietorship: In a sole proprietorship there is no legal distinction between the owner and the business. It is the most common form of business and it is the easiest to create the entrepreneur simply starts doing business, charging money, and providing goods.

* Liability: Since there is no separation between the owner and the business the owner is personally liable for all the businesses debts and obligations and there is no distinction between the owner's personal and business financial assets and liabilities.

* Income taxes: Tax planning can be difficult since income earned by the business is considered personal income. The United states has several income tax rates with personal income being taxed at the highest rate. The proprietor does have the benefit of writing off work related expenses as business expenses.

* Longevity: The business can end when the owner chooses but without proper planning the business and family income dies with the owner. In order to prevent the family being cut off after death the proprietor has to have either personal or business insurance and unless the last will and testament of the proprietor expressly states that the business may continue the business will be terminated at the time of death.

* Control: The main benefit of a sole proprietorship is that the owner is in control. In a sole proprietorship there isn't a boss or a partner that you need to report to or run decisions by. The proprietor has freedom of action and may change the margins of the business how he or she sees fit.

* Profit Retention: Since the sole proprietor is doing business by himself all profits belong to the business owner.

* Convenience or Burden: The biggest benefit of the sole proprietorship leads to its most unattractive quality unlimited and unshared liability. Just as the proprietor doesn't have anyone else he has to share the profits with the proprietor also doesn’t have anyone to share the losses with. If the...