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| 13164462759 | Characteristics of Sole Proprietorships | a. An unincorporated business owned and operated by one person b. The owner is the business; there is no separate business entity c. The sole proprietor is the sole decision-maker d. Governed by local and state law; no permission required by state to form a sole proprietorship | 0 | |
| 13164465748 | Advantages of Sole Proprietorships | a. Ease of formation—easy and inexpensive to form and maintain b. Managerial Discretion—sole proprietor may select the name of the entity, establish its location, hire employees, decide what products/services to offer, sell the business without needing anyone else's approval, etc. c. Retention of Profits—profits retained by sole proprietor d. Pass-Through Tax Status—income not taxed at the entity level; instead income passes through to the sole proprietor and is taxed at his appropriate individual rate. | 1 | |
| 13164473882 | Disadvantages of Sole Proprietorships | a. Unlimited Personal Liability—the sole proprietor's liability extends beyond what has been invested in the business to his personal assets (ex. bank accounts, art collections, furniture, etc.). The sole proprietor is also liable for the torts or civil wrongs committed by his employees in the course/scope of employment. b. Lack of Continuity—generally the sole proprietorship terminates upon death of the sole proprietor. c. Difficulties in Raising Capital—to raise money, the sole proprietor is limited to his own personal funds but may borrow money if he needs additional funds. d. Management Vulnerabilities—as the business grows, the sole proprietor may lack necessary expertise and therefore may need to spend money to hire other employees/advisors/consultants. | 2 | |
| 13164480909 | Licensing Considerations | a. some businesses have licensing requirements (ex. real estate, insurance or liquor licenses, etc.) | 3 | |
| 13164484018 | Name Considerations | a. if a proprietor operates his business under a name different than his own (called an assumed name, trade name or fictitious name), then such name must be registered with the local or state authority where business is conducted. The Fictitious Business Name Statement (sometimes called a DBA or "doing business as" Statement) is filed. The name must be available in the locality. (i) The purpose for filing the Fictitious Business Name Statement is to disclose the real owner of the proprietorship to the public and to make it possible for such person to be sued. (ii) If a proprietor uses his last name and does not imply others are involved (ex. Smith's Repairs) then no statement need be filed. | 4 | |
| 13164492834 | Business and Sales Tax Permits and Other Formalities | (i) Basic license to do business—required to do business in some jurisdictions (ii) Payment of sales taxes (iii) Obtain employer tax ID numbers to withhold taxes for employees, pay social security and workers' compensation funds. | 5 | |
| 13164497124 | Taxation of Sole Proprietorships | A. income derived from a sole proprietorship is added to any other income a proprietor may earn and taxed at a personal tax rate. The sole proprietor may deduct business expenses (ex. advertising costs, insurance premiums, cost of supplies, interest paid, etc.) in order to offset income. | 6 | |
| 13164497125 | Termination | a. No formalities and no federal/state government approval required. b. Third parties should be notified so as to avoid apparent authority and creation of agency by estoppels. c. Any agency that issued a license/permit or ID number should be notified. | 7 |
