2960674 - ASSIGNMENT (a) Discuss the nature of a Sole...

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ASSIGNMENT (a) Discuss the nature of a Sole proprietor, a partnership and a public listed incorporated limited liability company (corporation) in the light of the above statement Sole proprietorship A sole proprietorship , or simply proprietorship , is a type of business entity which legally has no separate existence from its owner. Hence, the limitations of liability enjoyed by a corporation and limited liability partnerships do not apply to sole proprietors. All debts of the business are debts of the owner. It is a "sole" proprietor in the sense that the owner has no partners. A sole proprietorship essentially means a person does business in his or her own name and there is only one owner. A sole proprietorship is not a corporation; it does not pay corporate taxes, but rather the person who organized the business pays personal income taxes on the profits made, making accounting much simpler. A sole proprietorship need not worry about double taxation like a corporate entity would have to. Most sole proprietors will register a trade name or "Doing Business As". This allows the proprietor to do business with a name other than his or her legal name and also allows the proprietor to open a business account with banking institutions. 1
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Advantages An entrepreneur may opt for the sole proprietorship legal structure because no additional work must be done to start the business. In most cases, there are no legal formalities to forming or dissolving a business. A sole proprietor is not separate from the individual; what the business makes, so does the individual. At the same time, all of the individual's non-protected assets (e.g homestead or qualified retirement accounts) are at risk. There is not necessarily better control or business administration possible with a sole proprietorship, only increased risks. For example, a single member, member managed LLC still only has one owner, who can make decisions quickly without having to consult others, but has the advantage of limited liability. In the United States a sole proprietorship has the option of buying health care for self-employed persons, such as a Health Savings Account. Furthermore, in many jurisdictions, a sole proprietorship files simpler tax returns to report its business activity. In the United States, for example, a sole proprietorship reports its income and deductions on a Schedule C on the individual's personal return. To the IRS, a single member LLC is treated as a disregarded entity, and thereby, the owner of a single member LLC will still report income and deductions on a Schedule C on their individual. In comparison, an identical small business operating as an S Corporation or partnership would be required to prepare and submit a separate tax return. As with all flow-through entities, all of the profits and losses from the
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2960674 - ASSIGNMENT (a) Discuss the nature of a Sole...

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