BUS311: Business Law I
Instructor: Daniel Malvin
A sole proprietorship is a one-person business that is not registered with the state as a corporation or a limited liability company (LLC). The owner of the Acme Firework is a sole proprietor that has never changed his business entity. A sole proprietor can be held personally liable for any business-related obligation. This means that if your business doesn't pay a supplier, defaults on a debt, or loses a lawsuit, the creditor can legally come after your house or other possessions. Product liability laws cover consumer goods and goods used at a workplace. If someone is injured by a defective product or suffers loss or damage to private …show more content…
As a sole-proprietorship it is easy for you, as an owner, to take money out of the business. You don’t have to make any formal distributions of profit – you just write yourself a check. As a sole-proprietorship, all of the money is pretty much considered yours right from the get go. However, corporations are different. Being entities completely separate from yourself, the IRS requires you and your Corporation to keep all income and expenses separate.
Corporations are superior entities, for sure, but along with the refinement comes restrictions. Shareholders can only remove profit from the Corporation according to their ownership percentage.
Apfelberg, Andrew M. San Diego Business Journal. 10/02/2000, Vol. 21 Issue 40, p84. 2p
Hertz, Giles T.; Beasley, Fred; White, Rebecca J. Journal of Small Business Strategy. 2009, Vol. 20 Issue 1, p81-102. 22p
Entrepreneurs often make decisions about the legal structure of their new business without fully considering the effect of the decision on other strategically important concerns. The question of whether the new venture should be formed as a sole proprietorship, partnership, corporation, limited liability company or one of several other legal forms is a complex one. To effectively answer that question requires the founder to consider the advantages and disadvantages of each, and how the choice will affect four primary areas of concern: startup costs; the firm's exposure