A1a. Sole Proprietorship- One person owns the business.
Unlimited Liability -Under sole proprietorship, only one person owns the business and there is no difference between the business and the owner. The owner takes full liability of everything that happens when operating the business. If a customer slips and falls, the business owner will be liable for 100% of any liability incurred. The personal and business assets are intertwined so if the business is sued, the owner could also forfeit personal property and assets as well. Any debt and obligation accrued by the business belongs to the owner as well.
Income Taxes- “Pass-through” taxation.
In short, the business taxes are filed under the owner’s individual tax return. Referenced from Nolo.com on “How Sole Proprietors Are Taxed”, when filing taxes for the business, the business income or losses are reported on Form 1040 under Schedule C (Profit or Loss from a Business). Also, with state and local income taxes, the business would have to pay any taxes required as a business.
Continuity of the Organization- If the owner dies, the business dies.
When the owner dies, the business dissolves. There is no continuity of the business after the owner’s death. Also, because it is a sole proprietorship, you cannot have partners or any other owners which could split liability in the business. The owner can sell or give away the assets of the business but not the business itself.
Control - Total control
There owner has ultimate control of every decision. The owner can hire managers or employees to delegate powers but the final say will always be the sole proprietors.
Profit retention- The profits of the business and the sole proprietor is synonymous with each other. Every penny the business makes belongs to the owner. The time and money invested in the business turns
