Business Organizations Sole Proprietorships

Business Organizations an enterprise or business that produces goods or services in order to make a profit. Provide jobs and income for people Pay taxes to finance government services Limited/Unlimited Life Limited Life: if business owner dies business will likely fail Unlimited Life: owner dies, business continues Limited/Unlimited Liability Limited Liability: Individual owners are only responsible for what they invest, nothing more Unlimited Liability: Owner is responsible for all losses

Sole Proprietorships a business owned and controlled by one person. Make up more than 70% of all businesses in the US Generate less than 5% of all sales by American businesses. Examples: mom-and-pop grocery shops, barber shops… Example business: Used Book Store Raising Funds. I need money to rent a store and buy books to stock the store. I can’t get a loan because I am a new business so my brother loans me the money. Preparing to Open Once I get my money in order, I need to take care of a few legal issues: (1) Get a business license, (2) get a site permit, (3) register the name of my store: Nerd Hearts Books.

Initial Difficulties It can be so slow that I am worried that I will not be able to pay the loan back. Most sole proprietorships fail in the first year. Success I invest in local advertising and people start to come in. Within 18 months I am able to pay back my loan and I start to earn a profit. Then I buy the store next to me and expand and I hire more employees. Then I ask the bank for a loan to pay off my renovations, they give it to me because I now have an established business.

Advantages of Sole Proprietorships Easy to Open or Close Start-up requirements are typical: funding, a license, permit, and a legally registered name. Once you have paid off debts, you can close anytime you want. Few Regulations Compared to other businesses, these have fewer regulations. Have to have a store in a special zone, must follow labor laws Freedom & Control Personal satisfaction Owner Keeps Profits If you are the sole owner, you get to keep all the profits and decide what to do with it.

At the start, you struggle, and have little money. Hard to get loans V. Disadvantages of Sole Proprietorships Limited Funds At the start, you struggle, and have little money. Hard to get loans These types of businesses are more likely to fail than any other. Limited Life Unlimited Liability Owner is responsible for all losses, debts and other claims against the business. Loss can be substantial.