Essay about Task 310

Task 310.1.2

SOLE PROPRIETORSHIP: A sole proprietorship is a business that is owned by one individual. This person is in control of the business decisions and ultimately the survival of the business. Most sole proprietors will have few employees, if any at all. In most aspects to this form of business, formalities and agreements are often not needed. Some of the significant advantages to having a sole proprietorship is: any monetary gain through profits would belong to the owner minus any overhead fees. They have the benefit of sheltering money through a single unit tax. These taxes can also constitute business expenses. The sole owner can make a decision without having to receive internal consent, giving greater flexibility and time management. Some disadvantages to this form would be: The inability to raise funds from outside investors. The business can be stifled from the need of necessary capital to operate. The business may suffer if the sole proprietor is sick or disabled since he greatly influences the operation in its entirety. One crucial disadvantage is the sole proprietor’s personal possessions, and assets are conjoining, making not only his business, but his personal assets vulnerable to liabilities. • Liability: The company would be responsible for all liabilities. In the event of this outcome, the owner’s business and personal assets are in jeopardy.
• Income taxes: Sole proprietorships files a 1040 form which is considered personal income. Along with the 1040 form they would file a Schedule C form explaining any business profits or loss. They do not have to file a business income tax form with the federal government.
• Longevity or continuity of the organization: Usually a sole proprietorship would cease to exist if the owner dies or can no longer run it. In some rare cases, the executor of a will may continue operations.
• Control: The sole proprietor has complete and absolute control over business decisions, directions, and power to delegate management.
• Profit retention: In this form of business, the owner potentially receives all profit minus any employees, operation costs, and taxes.
• Convenience or burden: Often a sole proprietorship can be a burden with the responsibilities and its entirety to operate. They have to stay current with all state and federal regulations and required licenses to operate.

GENERAL PARTNERSHIP: People may decide to pool their expertise and skills together to create a general partnership by way of contracts. These contracts would specify the terms of the partnership. It would highlight defined amount of time that partnerships may exist, if any. A contract may specify individual’s capital contribution for the business, the business name and scope of work. One party may have a controlling interest if so then profit division would be determined, along with the partner's roles and responsibilities. In General partnerships, they both work for the company and may have authority of business decisions and management. They would assume any financial obligations and be responsible for all liabilities. Advantages for partnerships are they receive monetary benefits and file an individual 1040 form. The downside of a partnership is in the event that one owner dies, the company would cease to exist. • Liability: Partnerships would assume all unlimited liabilities, including a deceased partners estate could be consumed to circumvent all of their business debts. Each partner’s personal assets are at risk in the event that the company can’t repay their creditors.
• Income taxes: Partnerships do not have to pay federal income tax. Each partner would file an individual income tax form followed with a 1065 that would express any profits earned and distributed in that tax year. Furthermore, they can supplement their personal income with deductions from business profit losses.
• Longevity or continuity of the organization: Unless the partnership has a buy-out plan and funded life

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