Chapter 8 Section 2 Sole Proprietorship and Partnerships Sole Proprietorship- a firms is owned and managed by a single individual. Earns all the firms’ profits & responsible for losses. Some have many employees, but many do not. A self-employed person is not considered to be a paid employee.

Who is Sole Proprietor? Most community business are owned by sole proprietors. Ex. Hair stylist, truckers, lawyers, doctors, & dentist. Consist of just one self-employed person Work at the business all the time through out the year, only part time, part of the year.

continued 5% are US business sales

Advantages of Sole Proprietorships Most common type of business 1. Easy to Start-minimum red tape & legal expense. Need a business license & permit to collect state & local sales taxes. 2. Few Government Regulations- maintaining accurate tax records and complying w/ employment laws. No employees. 3. Complete Control- boss, w/ complete authority over all business decisions, such as what to produce, what resources to hire, & how to combine these resource.

continued 4. Owner Keeps All Profit- does not have to share profits. 5. Lower taxes- Income is taxed only once as the owner’s personal income. (corporate income is taxed twice.) 6. Pride of Ownership-Creating a successful business & watching it grow can provide a sole proprietor tremendous satisfaction.

Disadvantages of Sole Proprietorship 1. Unlimited Personal Liability- a sole proprietor faces unlimited personal liability for any loss. Liability-is the legal obligation to pay any debts of the business. Owner is responsible to pay. (personal savings or sell personal assets, such as a home or automobile.

continued 2. Difficulty Raising Financial Capital-has no partners or other financial backers, raising enough money to get the business going. 3. Limited Life- business ends when the owner dies or leaves the business. Sold & becomes new ownership.

continued 4. Difficulty Finding and Keeping Good Workers- lack of permanence and difficulty raising financial capital, trouble offering workers job security. 5. Unlimited Responsibility- great deal responsibility.

Partnership Partnership-which involves two or more individuals who agree to contribute resources to the business in return for a share of the profit. One is talented and the other supplies the money.

Homework Read and do Chapter 8 section 3 page 247 #1-7