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This is a person who forms and operates a business. An entrepreneur may start a business by himself or herself or may cofound a business with others
Entrepreneurs can choose between 6 different forms of conducting business
All of these forms of business have their disadvantages and advantages that an entrepreneur must factor before creating a business.
- Sole proprietorship
- General partnership
- Limited partnership
- Limited liability partnership
- Limited liability company
This is form of business:
1. Is the most common
2. The simplest
3. Only has ONE OWNER
Under this form of business the owner is the actual Business the business in not a separate legal entity.
There are no formalities, and no federal or state government approval required.
1. Forming a Sole Proprietorship is easy and does not cost a lot.
2. The owner has the right to make all management decision concering the business, including those involving hiring and firing employees.
3. The sole proprietor (the Owner) owns all of the business and has the right to receive all of the business profits.
4. A sole proprietorship can be easily transformed or sold if and when the owner desires NO OTHER APPROVAL IS NECESSARY.
Advantages of a Sole Proprietorship
A sole proprietor’s access to the capital is limited to personal funds plus any loans he or she can obtain, and a sole proprietor is legally responsible for the business’s contracts and the torts he or she or any of his or her employees commit in the course of employment.
The disadvantage of having a Sole Proprietorship
The personal liability of a sole proprietor for all the debts and obligations of a sole proprietorship obligations of a sole proprietorship.
Creditors may recover claims against the business from the sole proprietors' personal asset (home, automobile, bank accounts)
Unlimited personal liability of a sole proprietor
Under this form of business organization the business is not a legal entity so it does not pay taxes at the business level.
Therefore the earning and losses of the business are claimed on the owners Tax return.
Taxation of a sole proprietorship
A business must meet four criteria to qualify as a general partnership under the UPA
It must be (1) an association of two or more persons (2) carrying on a business (3) as co-owners (4) profit.
A model act that codifies partnership law. Most states have adopted the this act in a whole or in part.
Uniform Partnership Act (UPA)
Persons liable for the debts and obligations of the general partnership
General Partners (partners)
A written agreement that partners sign to form a general partnership.
It is not mandatory but is a good thing to have in writing incase of a dispute. If an agreement fails to provide for an essential term or contingency, the provisions of the UPA apply. Thus, the UPA acts as a gap-filling device to the partners’ agreement.
General partnership agreement (articles of general partnership or articles of partnership)