Forms of Business Organizations and Key Characteristics and Differences

In: Business and Management

Submitted By chanty1985
Words 2552
Pages 11
Chantelé Shaw
LIT1: Task 310.2.1-01-06
Forms of Business Organizations and Key Characteristics and Differences
Student # 000258452

Part A
The Report

Sole Proprietorship A sole proprietorship is a privately owned business, that is owned by one person who has unlimited and unshared liability. The proprietorship, since managed by one person, has no need for any type of agreements or formalities. The self-governing aspect of the sole proprietorship, allows for the owner to make decisions on their own without criticisms and the complexities of added decision makers such as other managers or board members. A major benefit that is 3 fold is the impact of the financials of the company and the pockets of the owner. The proprietor is able to enjoy all of the profits from the company. Costs of doing business or expenses lead to tax breaks and the ability to, in essence, charge off expenditures. The advantage of pass through taxation is important to the “laid back” nature of managing a sole proprietorship. A simple profit and loss statement can be submitted along with the owner’s annual tax return and it is considered sufficient to the Federal Government. These proprietorships are very easy to start and just as simple to terminate. Once the owner has satisfied all contracts, it can be decided to take on no more work and terminate the business. Although the benefits are nice the disadvantages are just as cruel when it comes to the business. The downside to the autonomous nature of a sole proprietorship is the unlimited liability poses a far greater risk. Should the business owner lose big, creditors are able to pursue personal property of the owner if the business’ property is not sufficient enough to satisfy their claims. Another negative financial aspect, again tied to the independent owner, is lack of capital and credit to run the business and…...

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