1. Understanding Business and Personal Law Sole Proprietorship Section 27.1 Sole Proprietorship and Partnership A sole proprietorship is a form of business that is owned and operated by one person. However, that owner may have any number of agents or employees. Creation and Operation of a Sole Proprietorship

2. Understanding Business and Personal Law Sole Proprietorship Section 27.1 Sole Proprietorship and Partnership A sole proprietorship is the most common type of business and the easiest to form. Examples include: Creation and Operation of a Sole Proprietorship repair shops small retail stores service organizations

3. Understanding Business and Personal Law Sole Proprietorship Section 27.1 Sole Proprietorship and Partnership A person who goes into business as a sole proprietor can choose to operate under his or her own name or can make up a name. Creation and Operation of a Sole Proprietorship

4. Understanding Business and Personal Law Sole Proprietorship Section 27.1 Sole Proprietorship and Partnership If a sole proprietor uses anything but his or her own name, the law calls the made-up name a fictitious name. Creation and Operation of a Sole Proprietorship

5. Understanding Business and Personal Law Sole Proprietorship Section 27.1 Sole Proprietorship and Partnership In selecting a fictitious name, sole proprietors must not choose a company name already in use. Creation and Operation of a Sole Proprietorship

6. Understanding Business and Personal Law Sole Proprietorship Section 27.1 Sole Proprietorship and Partnership There usually are few formal requirements in establishing a sole proprietorship. Creation and Operation of a Sole Proprietorship

7. Understanding Business and Personal Law Sole Proprietorship Section 27.1 Sole Proprietorship and Partnership Some may be required to have Creation and Operation of a Sole Proprietorship licenses to legally operate as businesses occupational licenses certain types of liability insurance

8. Understanding Business and Personal Law Sole Proprietorship Section 27.1 Sole Proprietorship and Partnership Some states require a formal filing when a sole proprietorship begins or if the sole proprietorship chooses to use a fictitious name. Creation and Operation of a Sole Proprietorship

9. Understanding Business and Personal Law Sole Proprietorship Section 27.1 Sole Proprietorship and Partnership ease of creation total control retention of profits freedom from excessive governmental control one-time taxation of profits Advantages of a Sole Proprietorship

10. Understanding Business and Personal Law Sole Proprietorship Section 27.1 Sole Proprietorship and Partnership Ease of Creation A sole proprietorship is the easiest form of business association to form. To create a sole proprietorship, a person needs only to begin the operation of the business.

11. Understanding Business and Personal Law Sole Proprietorship Section 27.1 Sole Proprietorship and Partnership Ease of Creation When a sole proprietor decides to hire workers, he or she will have to contact the Internal Revenue Service to obtain an employer identification number, which is assigned for income tax purposes.

12. Understanding Business and Personal Law Sole Proprietorship Section 27.1 Sole Proprietorship and Partnership Total Control In a sole proprietorship, while the sole proprietor is free to seek the advice of experts, such as accountants, attorneys, and financial planners, all decisions are up to the sole proprietor.

13. Understanding Business and Personal Law Sole Proprietorship Section 27.1 Sole Proprietorship and Partnership Retention of Profits Sole proprietors get to keep all of the profits that the firm makes. They must, of course, pay taxes on those profits.

14. Understanding Business and Personal Law Sole Proprietorship Section 27.1 Sole Proprietorship and Partnership Freedom from Excessive Governmental Control The regulations a sole proprietor must follow are much less cumbersome than the regulations required of other types of business ownership, such as limited partners and corporations.

15. Understanding Business and Personal Law Sole Proprietorship Section 27.1 Sole Proprietorship and Partnership One-Time Taxation of Profits Sole proprietorships do not pay taxes as a business. Rather, the individual sole proprietor who owns the business pays taxes based upon his or her income, which includes any profits made by the business.

16. Understanding Business and Personal Law Sole Proprietorship Section 27.1 Sole Proprietorship and Partnership Disadvantages of a Sole Proprietorship limited capital unlimited liability limited human resources limited lifetime

17. Understanding Business and Personal Law Sole Proprietorship Section 27.1 Sole Proprietorship and Partnership Limited Capital All money used to finance the business must come from the proprietor’s savings or income, or from loans obtained by the proprietor.

18. Understanding Business and Personal Law Sole Proprietorship Section 27.1 Sole Proprietorship and Partnership Unlimited Liability Unlimited liability means that the business owner is responsible for all losses experienced by the business.

19. Understanding Business and Personal Law Sole Proprietorship Section 27.1 Sole Proprietorship and Partnership Limited Human Resources As the only person responsible for the decisions that affect the business, a sole proprietor is subject to tremendous stress. Even if he or she consults experts, the decision-making responsibility still falls upon the owner.

20. Understanding Business and Personal Law Sole Proprietorship Section 27.1 Sole Proprietorship and Partnership Limited Lifetime Unlike a corporation, which has perpetual existence, a sole proprietorship lasts only as long as the proprietor. When the proprietor dies or sells or closes the business, the company no longer exists.