Lit 1 Task 1

Business Law 310.1.2-01-06 Task A

Joshua Barrett

(A) Sole Proprietorship: Most common and easiest form of business. The owner is fully responsible for all income and losses associated with the business as there are no difference between the business and the owner. Because of this, the business is not taxed as a business. Taxes are the owner’s responsibility. Much like the taxes, all income is the sole owners as well. Income is report through two avenues, a Schedule C and a Form 1040, and the income is reported on the owner’s personal tax return. Upon the business closing or ending, the business must dissolve. The business cannot carry over to anyone else. Depending upon the type of industry some specialty licenses may be needed as licenses vary dramatically by industry, but to be a sole proprietorship, no special licenses are needed. A sole proprietorship can be done anywhere and moved anywhere in the country. There is no action that needs to be done to work under a sole proprietorship.

(B) General Partnership: A partnership, or general partnership, is the easiest and least expensive to create a business that owned by two or more people. A general partnership is usually created when all partners are involved in the day to day operations of the business. Each partner has control over the company and each partner has authority for the company. Also, each partner has full liability for the company’s debt or other obligations. There is no limit to how much the partners are liable for within the company. For taxes, a general partnership is not a separate entity from its owners. All business income goes directly to the owners who report gains or losses on personal tax returns. Partnerships must file a Form 1065 from the IRS. A major disadvantage to a partnership is when the business decided that someone no longer wants to be a part of the business. Unless some type of agreement (buy-sell agreement, or a buyout agreement) was in place so the business can...