This type of organization is owned by a single individual. One person is in charge of all of the business decisions and operates from personal funds. A sole proprietor is not required to go through a legal department in order to approve any contractual deals that may arise.
Liability: In a Sole Proprietorship, the owner is subject to unlimited liability. They are personally held liable for all of the debts the business may incur. Income Taxes: A Sole Proprietorship would be responsible for the business taxes that are levied on the business. They pay taxes once a year, and would report the income on their own personal tax filing. Control: The business owner would be responsible for all of the control in this type of organization. He or she would not have to relinquish control to any outside parties, and they would be solely responsible for the decisions made for the business. Profit Retention: All profits go directly to the business owner in a sole proprietorship. He or she would have no partners or shareholders to divide the money between and would be able to pocket any profit. Expansion: Since all of the business making decisions fall squarely upon the shoulders of the sole proprietor, they would be able to relocate or expand without having to consult any other party. Compliance: The owner of the sole proprietorship is solely responsible for ensuring that the business is in compliance with all reporting and other regulatory laws and requirements.
Advantages and Disadvantages
The main disadvantage of a sole proprietorship would be the difficulty with which funds can be raised for the business. All start ups require a working capital, and it can be hard for a sole proprietor to come up with the capital needed to start and/or maintain the business. Another disadvantage to having a sole proprietorship would be that the owner is subject to unlimited liability, therefore any debts the business occurs would be responsibility of only the owner. There are several advantages to running a sole proprietorship, however. For instance, a sole proprietorship allows the owner complete freedom in terms of decisions about the company. They are not required to consult any partners, nor do they have to seek approval before moving forward with any projects or ideas. Also, proprietorships are easy to form. The owner needs to provide all necessary documents for the registration of the company.
This type of organization is formed when two or more individuals create a partnership in order to share the profits and losses of their venture.
Liability: As opposed to the sole liability in the sole proprietorship, in a general partnership, each partner is held jointly liable for any obligations or debts that the organization may incur. Income Taxes: Same taxation as a sole proprietorship, since the income is divvied out to the partners. They would then file that income on their own personal tax return. Control: The control of the business is much different from the sole proprietorship, in that each partner of a general partnership has an equal say in the dealings of the organization, unless otherwise modified by contract. Profit Retention: The profits in a general partnership are divvied up equally among all of the partners, as well as the losses. Expansion: Much like the Sole proprietorship, there is no legal involvement in expanding or moving locations, it just requires the consent of all partners involved. Typically, a contract or document is signed to show that all partners agree to the expansion or relocation of the company. Compliance: The partners are required to ensure that the organization is in compliance with all state and federal regulations and laws.
Advantages and Disadvantages
One of the biggest advantages of having a general partnership as opposed to a sole proprietorship is that all of the profits and losses are shared equally. This helps to