TASK 1 PART A
SOLE PROPRIETORSHIP: A sole proprietorship is a personally owned business that is not incorporated. In this business form the day to day operations and decisions are generally performed by the owner. Based on the premise of sole ownership the debt, profit, and success of the business are the owner’s direct responsibility.
While the sole proprietorship offers many advantages such as freedom of action, single tax, sole profit, and ease of startup legalities, there are also some disadvantages. Because it is singular ownership there are no partners to share responsibility in terms of financial and legal liabilities that may arise. Also in sole proprietorship there are no boundaries between claims against the business and personal assets.
• LIABILITY - There is no shared liability in this business model. The owner must raise capital and secure lending based on personal guarantee and credit worthiness. In the event of personal tragedy or business failure creditors can make claims against the personal assets.
• INCOME TAXES - In a sole proprietorship the owner and the business are taxed as one entity. Any profit of the business is considered personal income. Separate tax documents are not filed for the business which is referred to as “pass through taxation”.
• LONGEVITY/CONTINUITY - Without proper planning a sole proprietorship will cease to exist in the event of death. The owners must clearly state the intent for the business or the courts will rule that all activities must cease, unless the transaction is essential.
• CONTROL - In a sole proprietorship there is unshared freedom to act. All decisions are the responsibility of the owner. This includes but is not limited to operations such as business capital, marketing, scheduling, products and services.
• PROFIT RETENTION - Since there is no shared responsibility all profits and proceeds are the property of the sole proprietor of the business. There are no stockholders or partners so there...