Chapter 18 - Sole Proprietorships

Chapter 18 - Sole Proprietorships - Chapter 18: Starting a...

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Chapter 18: Starting a Business Sole Proprietorships An unincorporated business owned by one person Easy and inexpensive to create and operate No need to hire a lawyer or register with the government Not required to file a separate tax return – all profits and losses are reported to the owner’s personal return Responsible for all debts and is personally liable Limited options for financing Corporations The dominant form of organization which is regulated by the law State laws regulate, but federal statutes determine their tax status Corporations in General Limited Liability: o If a business flops and cannot pay its bills, shareholders lose their investments in the company, but not their own assets o Does not protect against all debts o Individuals are always responsible for their own acts Transferability of Interests: o Provide flexibility for enterprises small and large o Partnership interest are not transferable without the permission of the other partners o Corporate stock can be bought and sold easily Have perpetual existence, can continue without their founders Logistics: o Require substantial expense and effort to create and operate o The cost of establishing may exceed $1,000 in legal and filing fees o Must also hold annual meetings for both shareholders and directors, minutes must be kept in a minute book Taxes: o Must pay taxes and file a return o Taxable entities and pay income tax on their profits
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Chapter 18 - Sole Proprietorships - Chapter 18: Starting a...

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