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Agribusiness Library

Agribusiness Library. Lesson L060006 : Sole Proprietorships. Objectives. 1. D escribe characteristics of a sole proprietorship. 2. List advantages of a sole proprietorship. 3. List disadvantages of a sole proprietorship. Key Terms. Business entity Sole proprietorship

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Agribusiness Library

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  1. Agribusiness Library Lesson L060006: Sole Proprietorships

  2. Objectives 1. Describe characteristics of a sole proprietorship. 2. List advantages of a sole proprietorship. 3. List disadvantages of a sole proprietorship.

  3. Key Terms Business entity Sole proprietorship Unlimited liability

  4. What are the characteristics of a sole proprietorship? • A sole proprietorship is a business entity with a single owner/operator. • A business entity is a professional organization offering something that has real existence. • The following factors characterize a sole proprietorship.

  5. What are the characteristics of a sole proprietorship? • A. It is the oldest, most common, and simplest form of business organization. • B. One person can serve as the business decision-maker. • C. No registration with the state is required, as is necessary with a corporation or a limited liability company (LLC).

  6. What are the characteristics of a sole proprietorship? • D. It is easily set up and maintained. • E. The owner is personally responsible for assets, income taxes, and business debts. • F. It is relatively simple to manage and control.

  7. What are some advantages of a sole proprietorship? • A sole proprietorship has several advantages. • A. The owner is his or her own boss. • B. No legal formalities are involved in forming or dissolving the business. • C. The money the business makes belongs to the owner. • D. Decisions can be made quickly.

  8. What are some advantages of a sole proprietorship? • E. Start-up costs may be minimal. • F. A sole proprietorship is a good type of organization for a business: • 1. That will remain small • 2. That does not have great exposure to liability • 3. That does not justify the expenses of incorporating and ongoing corporate formalities.

  9. What are some disadvantages of a sole proprietorship? • A sole proprietorship has several disadvantages. • A. Raising capital to start the business is difficult. • 1. Banks are less willing to lend money to one person for a business venture. • 2. Banks that approve loans may have higher interest rates.

  10. What are some disadvantages of a sole proprietorship? • B. The owner has unlimited liability. • Both the business and personal assets of the sole proprietor are subject to the claims of creditors. • When the owner assumes unlimited liability, he or she may lose all personal and business assets to pay bills or money owed to other parties. • C. The business ends if the owner dies.

  11. What are some disadvantages of a sole proprietorship? • D. This owner is responsible for the entire business. • E. The owner is responsible for personal health insurance. • F. The owner is responsible for withholding and paying all income taxes.

  12. What are some disadvantages of a sole proprietorship? • G. The sole proprietor must pay a self-employment tax, which consists of contributions to Social Security and Medicare. • In addition, he or she must pay estimated taxes throughout the year. • H. The sole proprietor may have to register the business name and pay local taxes for owning a business.

  13. REVIEW What are the characteristics of a sole proprietorship? What are some advantages of a sole proprietorship? What are some disadvantages of a sole proprietorship?

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