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Description:
For many small companies, Sole Proprietorship is the most common form of business structures. Sole proprietorship is considered one unit and same as its owner. The advantage of this structure is that it is flexible and simple. However, the negative feature of this structure is that of personal liability.
Taxation: A sole proprietorship business operates on pass-through taxation structure. In this
method, there is no tax filed on behalf of business, rather it is regarded in the personal tax return of the owner. Liability: In sole proprietorship, the owner is responsible for debts and has unlimited liability.
However, a sole proprietor can work on the same ease as the owners of corporation and insure himself against most risks through implementing insurance for tort risks and making contractual limitations for contract risk. Continual Existence: The life span of sole proprietorship is only limited to the life of the owner or
when the owner decides to shut down the business. Control and Risk: In this structure the owner has the full control over the business that
eventually comes with full risk of the business. Transferability: The transferability process in the sole proprietorship is a very easy method. The
owner just has to prepare a document of purchase agreement of sale of assets and can easily sell the assets. After the document is signed, the assets of the sole proprietorship are transferred along with the owner’s estate, once the owner is dead. The transferability has two ways; testate and intestate. Die testate means that the owner has a valid and definite will and so the business is transferred to the person stated in the will. In die intestate, there is no valid will for the transferability of business and thus, the distribution of assets amongst the heirs is determined by the laws of intestate. The interstate laws are often rational but the better way is to provide a will for the succession of business. Expense and Formality: Sole proprietorship is the simplest form of doing business. The formality
doesn’t have high levels and the cost of formation is very low. Usually the name of the business is the same as the owner’s. But if it is not then it should be registered with the state.
Reference: http://www.researchomatic.com/sole-proprietorships-79433.html Page 1