Lit1 Part a

There are many different choices for a business owner looking to form a business organization. Several types will be identified over the next few pages. The advantages and disadvantages of each will be identified.

SOLE PROPRIETORSHIP: This is the most common and easiest organizational form to set up in the United States. The owner of the company makes all of the decisions and keeps all the profit. They are also personally liable for all things with the business. The business name is just an extension of their personal name.

• Liability: The owner takes on all liability off the company. This means that their business and personal assets could be used if they fail to preform, have financial issues, or if a person or property is damaged.

• Income Taxes: The owner is only taxed once on their earnings. They report all earnings on their individual income tax return. They can also write off any costs associated with running the business.

• Longevity or continuity of the organization: While it is easy to start a Sole Proprietorship, growing and expanding the business can be challenging. This is because they are limited to their own capitol and their debt ceiling is not as high as a larger organization.

• Control: The owner makes all decisions for the company and has to work with the good and bad consequences. If the owner dies or retires, the company typically would just cease operations.

• Profit Retention: The owner of a sole proprietorship keeps all of the profits of the business; however, they are responsible for all of the debts.

• Location: The owner has the flexibility of working out of their house, renting, or purchasing a building/office. This could be affected by the type of business or governmental laws stating where a business can be.

• Convenience or burden: Overall the Sole Proprietorship is more of a convenience than burden. This is due to the ease and the simplicity of which it is started and ran. The liability and limited...